Q4 2024 Sunstone Hotel Investors Inc Earnings Call
Speaker Change: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Stunt Hotel Investors fourth quarter earnings call. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session and instructions will be given at that time.
Speaker Change: I would like to remind everyone that this conference is being recorded today, February 21, 2025, at 1 p.m. Eastern Time. I will now turn the presentation over to Mr. Aaron Reyes, Chief Financial Officer. Please go ahead, sir.
Aaron Reyes: Thank you, Operator. Before we begin, I would like to remind everyone that this call contains forward-looking statements that are subject to risks and uncertainties, including those described in our filings with the SEC, which could cause actual results to differ materially from those projected.
Aaron Reyes: We caution you to consider these factors in evaluating our forward-looking statements.
Aaron Reyes: We also note that the commentary on this call will contain non-GAP financial information including adjusted EBITDA RE, adjusted FFO, and property level adjusted EBITDA RE.
Aaron Reyes: We are providing this information as a supplement to information prepared in accordance with generally accepted accounting principles.
Aaron Reyes: Additional details on our quarterly results have been provided in our earnings release and supplemental which are available in the investor relations section of our website.
Speaker Change: With us on the call today are Brian Giglia, Chief Executive Officer, and Robert Springer, President and Chief Investment Officer.
Speaker Change: Brian will start us off with some highlights from last year, followed by commentary on our fourth quarter operations and recent trends.
Speaker Change: Afterward, Robert will discuss our capital investment activity, and finally, I will provide a summary of our fourth quarter earnings results, review our current liquidity position, and provide the details of our outlook for 2025.
Speaker Change: After our remarks, the team will be available to answer your questions.
Brian Giglia: With that, I would like to turn the call over to Brian. Please go ahead.
Thank you, Aaron, and good morning, everyone.
Brian Giglia: Despite several headwinds during the fourth quarter, the portfolio finished 2024 strong with full-year adjusted EBITDA and full-year adjusted FFO per share at the high end of our guidance.
Brian Giglia: The fourth quarter caps off a productive year at Sunstone in which we made further progress on our three strategic objectives, which include recycling capital, investing in our portfolio, and returning capital to our shareholders.
Brian Giglia: All of these benefited the company and its shareholders in 2024 and will provide additional growth in 2025.
during the first half of 2024.
Brian Giglia: We successfully recycled proceeds from the sale of the Boston Park Plaza into the 630-room Hyatt Regency San Antonio Riverwalk for a net purchase price of $222 million after incentives, reflecting an attractive 9% capitalization rate on 2024 earnings.
Brian Giglia: In addition to the compelling initial yield, we have identified several value-enhancing opportunities that we will capitalize on in the near term.
Brian Giglia: The hotel has an ideal location, situated between two of the state's biggest leisure demand drivers, the Riverwalk and the Alamo, and the hotel is within walking distance to the convention center.
Brian Giglia: This year, we are updating the meeting space to better align it with the quality level of the already renovated guest rooms.
Additionally,
Brian Giglia: leading up to the opening of the new 500 million dollar Alamo Visitor Center and Museum in 2027.
Brian Giglia: We will enhance the ground floor retail spaces as we expect this area will be a primary access point to the new Alamo grounds and offers the opportunity to drive additional lease revenue.
Brian Giglia: Overall, we have been very pleased with this investment and we see considerable potential to grow group and transient business.
Brian Giglia: building on the success of our conversion of the Westin Washington DC downtown.
Brian Giglia: We continue to invest in our future growth, and in 2024, we completed the conversion of the Marriott Long Beach Downtown, which began its ramp-up at the end of last year and which will continue into this year.
Brian Giglia: We also advanced the transformation of the Andaz Miami Beach, which is opening in the next few weeks.
Brian Giglia: While the ONDAS has taken a bit longer than anticipated due to a very challenging permitting and approval process in Miami Beach, the resort is moving through final inspections and will begin welcoming guests mid-March.
Brian Giglia: The resort looks phenomenal and we are very excited to demonstrate its earnings power as it ramps up in 2025 and 2026.
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Speaker Change: Shortly, Robert will share some additional details on our work in Miami and our other capital investment activity.
Speaker Change: The last element of our strategy is the return of capital to our shareholders.
Robert Springer: In 2024, we return nearly $100 million to shareholders through our quarterly dividend and share repurchases at a meaningful discount to NAV. While our share repurchase activity will remain opportunistic,
Robert Springer: Our common dividend will continue to provide a more consistent return of capital.
Robert Springer: That said, over the last three years, we have repurchased nearly $190 million of common stock or almost 9% of shares outstanding at the start of that period.
Robert Springer: Our strong balance sheet and liquidity position gives us the ability to enhance our capital returns as we move into 2025.
Robert Springer: Now shifting to our quarterly and four-year results. We were pleased with how the portfolio performed relative to our expectations.
Robert Springer: During the fourth quarter, excluding San Diego, which experienced lingering disruption due to the labor strike,
Robert Springer: Group business performed well. Corporate travel continued to move higher and leisure demand showed some acceleration in wine country and in Maui during the festive period.
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Robert Springer: Convention business at the Westin Washington DC Downtown had a banner year leading our group hotels with 30% rep park growth driven by an 18% increase in full-year group room nights on a 6% increase in rate.
Robert Springer: Out-of-room spend at the Westin was up over 16% for the full year at $213 per room.
Robert Springer: Group business remained strong at the recently acquired Hyatt Regency San Antonio Riverwalk, which grew room nights nearly 7% in the quarter and generated an impressive 18% increase in banquet contribution.
Robert Springer: For the full year, San Antonio group room nights were up 3%, rate was up 2%, and out-of-room spend was up 20%.
Robert Springer: Given the upgrades we are making to the meeting space this year, we expect the hotel to continue to build and improve the overall quality of its group base.
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Robert Springer: We also saw strength in our urban markets, where, at many of our hotels, we strategically increased our group base, allowing our operators to compress transient rates.
Robert Springer: At our New Orleans hotels, fourth quarter group room nights were up 23%, compressing transient rates and resulting in a combined RevPAR growth of nearly 20%.
Robert Springer: We saw similar results in Boston, with fourth quarter group room nights up 39%, as the hotel focused on filling open patterns and driving occupancy in shoulder periods.
Robert Springer: Our recently converted Marriott Long Beach downtown had a solid quarter with REPR up 45% compared to a renovation impacted fourth quarter of 2023.
Robert Springer: We are pleased with the early performance of this recently converted Marriott, and together with the success we have seen from the contribution of the Westin DC, it reinforces our thesis on the value created from better brand alignment.
Thank you.
Robert Springer: On the expense side, we continue to work with our managers to offset rising costs through efficiency measures and increase productivity.
Robert Springer: Our margin performance in the prior year was impacted by renovation activity in Long Beach and the strike in San Diego.
Robert Springer: Excluding these two hotels and Onda's Miami Beach, our margins were down only 70 basis points, even with minimal top-line growth, which speaks to the effort of our operators to be disciplined in their cost management efforts.
Robert Springer: While our 2025 budgets incorporate contractual wage rate increases at certain hotels,
Robert Springer: Our expectation is that our operators will seek to drive efficiencies, higher rates, and incremental ancillary revenues to help mitigate these rising costs.
Robert Springer: Looking forward to 2025, we are encouraged about the outlook for the year. The portfolio continues to benefit from recent investments, which should provide a tailwind for us in 2025 and 2026.
Robert Springer: Group pace is up approximately 10% with broad-based strength throughout the portfolio and across quarters with Q3 being the softest of the year.
Robert Springer: In addition to growth from our completed conversions at Long Beach and Miami, the portfolio will benefit from the easy comparison in the second half of the year in San Diego, which was impacted by the labor strike in 2024, and from continued growth in wine country.
Robert Springer: We maintain significant liquidity and look to recycle existing investments into new opportunities to grow our earnings and value per share.
Robert Springer: Despite being faced with a challenging transaction market in 2024, we were able to execute and acquire a high-quality asset in San Antonio at a great current yield and with opportunity to add value.
Robert Springer: We expect to continue our disciplined approach to capital allocation in 2025, which could include asset sales, acquisitions, or additional share repurchases.
Robert Springer: To sum things up, we executed our three strategic objectives in 2024, and while the path was not as smooth as we would have liked, we are now well positioned to outperform in 2025 and 2026.
Robert Springer: We are focused on delivering profitability growth from our operations and realizing the benefits of our investment projects.
Robert Springer: We will further advance our capital recycling strategy by utilizing our available liquidity and balance sheet capacity to thoughtfully grow the portfolio.
Robert Springer: These actions should further support our capital return objectives in the coming years.
Robert Springer: And with that, I'd like to turn the call over to Robert to give some additional thoughts on our renovation progress and upcoming capital investments.
Robert, please go ahead.
Robert Springer: Thanks, Brian. During 2024, we invested $157 million into our portfolio as we had multiple capital initiatives underway. The majority of these projects have recently or soon will be wrapping up, and we look forward to the earnings benefits they will now provide.
Robert Springer: As we have shared with you last quarter, we are nearing completion on a rooms renovation and lobby refresh at the Wailea Beach Resort, and have been performing the work around peak periods to minimize displacement.
Robert Springer: As part of the scope, we are combining a few rooms to create four residential-style oceanfront villa units with a kitchen, generous living area, and the ability to sell them in multiple configurations ranging from one to four bedrooms.
Robert Springer: While the first two have just come online, early feedback has been great and they are already allowing the hotel to better compete with its luxury neighbors and win higher quality group business.
Robert Springer: As Brian noted earlier, we have made substantial progress in Miami where construction is winding down and the resort is preparing to welcome guests as we work through the final steps in the cumbersome inspection and approval process.
Robert Springer: We are very pleased with the finished product and the degree of transformation we have achieved at this property.
Robert Springer: We have teams in the hotel now completing training and preparation work, and we look forward to opening the resort in a few weeks.
Robert Springer: While our total capital investment in 2025 will moderate back to more normalized levels, we will still have some important value creating initiatives underway.
Robert Springer: In San Antonio, we will be renovating the meeting space starting in the third quarter, which should wrap up by the end of the year.
Robert Springer: While the hotel is in great shape, a refresh of the meeting areas will better align them with the already renovated guest rooms and allow our sales teams to market a more cohesive product and drive more group business.
Robert Springer: In San Diego, we are in the planning stages for a renovation of the meeting space at our Hilton Bayfront. While we are still finalizing the details, we would not expect it to begin until late in the fourth quarter.
Robert Springer: Overall, the level of investment we have planned for the coming year will result in less earnings disruption than in the last two years, and we will instead get the benefit of the work we have already wrapped up or soon will be completing.
Robert Springer: As Brian alluded to earlier, the transaction market in 2024 was not as robust as we had hoped, but we continue to seek out opportunities to drive further growth by recycling capital and deploying our considerable investment capacity.
Robert Springer: We look forward to updating you on our progress as the year progresses with that. I'll turn it over to Aaron. Please go ahead
Aaron Reyes: Thanks, Robert. Our earnings results for the fourth quarter came in ahead of expectations, as stronger ancillary revenue, better expense management across the portfolio, and savings at the corporate level served as a tailwind to inline rooms revenue growth.
Brian Giglia: Full year EBITDA was $230 million and FFO was 80 cents per diluted share, both of which were at the high end of our previously provided guidance ranges.
Brian Giglia: Prior to the end of the quarter, we fully drew our recently arranged $100 million term loan and utilized most of the proceeds to repay the mortgage on the JW Marriott New Orleans.
Brian Giglia: Following this refinancing, all of our debt is unsecured, and our balance sheet provides significant flexibility.
Brian Giglia: Inclusive of our extension options, we don't have any debt maturities until 2026.
Brian Giglia: As of the end of the year, we had nearly $180 million of total cash and cash equivalents, including our restricted cash.
and we retain full capacity on our credit facility.
Brian Giglia: which together with our cash equates to nearly 700 million dollars of total liquidity.
Brian Giglia: Our net debt and preferred equity to trailing EBITDA stood at 4.3 times as of year-end, and we expect this will continue to moderate downward as we move through the year and realize the growth in our earnings.
Brian Giglia: In fact, based on the midpoint of our 2025 guidance, our net leverage would be only 3.9 times, which further illustrates the strength and increasing capacity of our balance sheet.
Brian Giglia: Included in our earnings release this morning are the details of our initial outlet for 2025.
Brian Giglia: Our strong top-line growth is a direct result of the multiple investments we have made within our portfolio.
Brian Giglia: The debut of Onda's Miami Beach is expected to add nearly four points of growth this year.
Brian Giglia: But even if we exclude this resort, our remaining portfolio REV part is still projected to grow a healthy 3% to 6%.
Brian Giglia: We estimate that full year adjusted EBIT.RE will range from $245 million to $270 million and our adjusted FFO per diluted share will range from $0.86 to $0.98.
Brian Giglia: At the midpoints, this reflects annual growth of 12% and 15% respectively.
Brian Giglia: While we expect the distribution of quarterly growth for the industry will be more balanced in 2025 than what was initially expected for 2024, we will have some portfolio specific considerations that will influence the cadence of our overall growth.
Brian Giglia: For the total portfolio, we expect that REV Part Growth for the first quarter will be in the area of 3-5%.
Brian Giglia: before increasing to approximately a double-digit range for the balance of the year, as we benefit from the opening of Onda's Miami Beach and experience the easier comparison in Q3 and Q4 from the impact of the strike in San Diego.
Brian Giglia: This would generally translate into EBITDA distribution of approximately 21% to 22% in the first quarter.
Brian Giglia: approximately 30% in the second quarter, with the remaining balance spread more or less evenly across the third and fourth quarters.
Brian Giglia: In the 2025 Outlook section of our press release, we have included the key assumptions that support our full year guidance numbers.
Brian Giglia: Our projections assume that Andas comes online in mid-March and contributes $8 million to $9 million of EBITDA in 2025.
Brian Giglia: Given the change in timing for the project, we incurred less pre-opening costs in 2024 than initially projected.
Brian Giglia: And now expect that some of these items will be incurred in 2025.
Brian Giglia: Following the redeployment of the Boston Park Plaza sale proceeds last spring and the change in deposit rates, we expect to generate less interest income on our cash balances in 2025 than we earned in 2024.
Robert Springer: As Robert noted, our capital investment activity for this year will be lower than our run rate in recent years, and is expected to be in the range of $80 million to $100 million.
Robert Springer: Based on this level of investment and the nature of the projects we have planned, we will have meaningfully less earnings disruption in 2025 relative to what we experienced in the last couple years.
Speaker Change: I would like to withdraw your question. Please press the pound key or start to one moment. Please for your first question.
Speaker Change: Your first question comes from the line of Duane <unk> of Evercore ISI. Please go ahead.
Speaker Change: Okay.
Duane: Hey, Thanks, good morning.
Speaker Change: Good morning, just wanted wondering if you could speak to the underlying demand segment assumptions.
Speaker Change: The seven 7% to 10% Revpar guide or maybe you want to think about that ex the andaz contribution, but how are you thinking about leisure growth group contribution.
BT within that 7% to 10.
Speaker Change: Sure.
Speaker Change: So looking at the Revpar guidance for this year.
Speaker Change: Based on the feedback we get from our hotels and what our hotels are seeing at this point. So when you look at the different segments.
Speaker Change: It assumes that group continues to be very solid we're pacing above 10% for the year. So from a group standpoint, the continuation of very solid performance.
A.
Speaker Change: Business transient standpoint.
Speaker Change: Continued strength in slight improvement in certain markets.
Speaker Change: But more of a continuation of what you were seeing at the end of last year.
Speaker Change: And then the leisure.
Speaker Change: Is expecting to see roughly what we what we were seeing last year with maybe a little bit of pickup in the third and fourth quarter.
Speaker Change: In in Maui.
Speaker Change: And so when you look at that and you put all that together.
Speaker Change: If you ask where is the potential risk or upside.
Speaker Change: In the 2025.
Speaker Change: Guidance.
Speaker Change: It really comes down to a leisure.
Speaker Change: The leisure segment and more.
Speaker Change: Multiple markets, whether it would be.
Speaker Change: Maui with with recovery and slower than anticipated.
Speaker Change: Anticipated recovery, but so seeing and we saw very good festive season last year to see some additional recovery, but not back to where we were in Maui.
Speaker Change: And back end loaded to see some of this advertising and promotion some of it.
Speaker Change: That really.
Speaker Change: To catch.
Speaker Change: And then other markets, maybe like Orlando too, where you have a new park opening.
Speaker Change: <unk>.
Speaker Change: Leisure where to pick up there that would be some upside for us.
Speaker Change: When you back out.
Speaker Change: On <unk> and you back out the <unk>.
Speaker Change: Long Beach lift.
Speaker Change: There are some some individual assets that are growing pretty strongly in the portfolio and then there are others that are more.
Speaker Change: More closely aligned with.
Speaker Change: The with the sector growth.
Speaker Change: And so from a cost standpoint, I think that that allows us to to really focus on cost and if we see additional revenue or additional pick up then that should flow pretty well.
Speaker Change: Okay I'll keep it there thank you for the thoughts.
Speaker Change: Your next question comes from the line of Smedes Rose of Citi. Please go ahead.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Hi, Thanks.
Speaker Change: I wanted to ask you could you just share with us what the.
Speaker Change: Pace of wages and benefits increases were in 24 at the hotel at the property level and kind of where you are expecting those to pace in 2025.
Speaker Change: Yes, good morning Smedes.
Speaker Change: We've always said historically that wages and benefits and have been between the.
Oscillating between four and 6%.
Speaker Change: Last year, we were in the call. It the mid fours there were several.
Speaker Change: Our collective bargaining agreements that were settled last year.
Speaker Change: In our markets and so this San Diego being one of them.
Speaker Change: Yes, so that's in San Francisco also so thats something that typically what happens is that the.
Speaker Change: They tend to be front end loaded and so that first year, the wages will be more than what will be the average wage over the life of the agreement.
Speaker Change: So if you look at that four to six range will be closer to the higher end of that in 'twenty. Five so it's definitely a step up from 24, and then we will moderate back down in 'twenty six 'twenty seven.
Speaker Change: To get to.
Speaker Change: Below that and then bring that average back down to where we historically have been in the.
Speaker Change: Call it 4%, 5% range.
Speaker Change: Okay. Thank you.
Speaker Change: Okay.
Speaker Change: Your next question comes from the line of Dori Kesten with Wells Fargo. Please go ahead.
Dori Kesten: Hi, Thanks, good morning.
Speaker Change: Ladies said this year the Andaz EBITDA would be about $8 million to $9 million. How are you thinking about the ramp in <unk>.
Dori Kesten: <unk> 26 for that asset.
Dori Kesten: Good morning Dori.
Speaker Change: So.
Speaker Change: Looking at the ramp and the ramp for <unk>.
Speaker Change: 25, and then going into 'twenty, six and ultimately into 'twenty seven.
Speaker Change: The ramp will go.
Speaker Change: Yes.
Speaker Change: To start off in the probably.
Speaker Change: Probably around the 20% in March and then as we look into Q2 Q3.
Speaker Change: Probably around the 50 ish percent.
Speaker Change: Occupancy getting into the high season in the fourth quarter, where we should be in the in the seventies.
Speaker Change: Then looking into next year when you look at the seasonality of Miami Beach January and February are very big months.
Speaker Change: And so if we are looking at call it $8 million to $9 million in EBITDA This year.
Speaker Change: Next year, we should.
Speaker Change: Easily double that EBITDA for 425 I'm.
Speaker Change: Im sorry, 26, and then as we get into 2007 reach closer to that stabilization.
Speaker Change: Into the into the high <unk>.
Brian Giglia: Thanks, Brian.
Speaker Change: Your next question comes from the line of Michael Bellisario Baird. Please go ahead.
Michael Bellisario: Thanks, Good morning, guys.
Brian Giglia: Good morning, Michael.
Speaker Change: Just wanted to.
Speaker Change: Golar, the Napa assets and John can touch on them too much in the prepared remarks, but maybe give us an update on.
Speaker Change: Now the operational improvements that you are employing are tracking against plan and then what's embedded in the 25 guide for these hotels, presumably youre, assuming no you'll you'll realize top and bottomline growth at these assets and 25.
Speaker Change: Sure.
No.
Speaker Change: Looking at 'twenty, four and all of this information is available in our supplemental.
Speaker Change: We had good.
Speaker Change: EBITDA growth at both hotels.
Speaker Change: As we implemented the plan that we had on the cost side and a plan that we had on the group side, knowing that the transient occupancy is going to be.
Speaker Change: More tied to.
Speaker Change: Outbound travel and also.
The health and.
Speaker Change: The San Francisco Bay area market. So we had between the two hotels, a little over $3 million of EBITDA growth on a percentage basis, that's pretty strong and that came from a combination of continuing to get each hotel closer to its.
Speaker Change: What we believe is the optimal group mix.
Speaker Change: Yes, that's in the mid sixties at montage.
Speaker Change: Montage and in the mid <unk>.
Speaker Change: <unk>.
Speaker Change: In the four seasons and were.
Speaker Change: We're getting closer to that but still probably several points of occupancy away.
Speaker Change: To get to that goal. So when you when you see the numbers for 'twenty five youll see that the group room nights room nights in general are up rate was down a little bit ancillary spend still in.
Speaker Change: 900 ish range for montage in over 1004 seasons, and so being able to yield out that group customer.
And so.
Speaker Change: That that went very well and where we.
Speaker Change: We're pretty much on target for where we want to be there on the cost side that process started at the montage and followed at the four seasons.
Speaker Change: We were able to get about a little over $1 million of cost out of the montage while maintaining.
Speaker Change: Very high customer satisfaction.
Ratings, so we were able to change process without changing the impact to the guest.
Speaker Change: Four seasons.
Speaker Change: A little bit below.
Speaker Change: But we have additional work to do and Thats in process now and again the same impact on groups.
Speaker Change: Guests satisfaction.
Speaker Change: When we look into 'twenty five we do look at continuing to build that group base.
A <unk>.
Speaker Change: The increase in leisure or AC surprise and leisure. This year is definitely upside at these hotels will be upside at these hotels and given where we have the cost model set now.
Speaker Change: Additional occupancy will flow meaningfully to the bottom line.
Speaker Change: Even without that and not banking on that growth yet.
Speaker Change: We still are anticipating another couple million dollars of EBITDA growth.
Speaker Change: At each of these hotels this year.
Speaker Change: Very helpful. Thank you.
Chris: Your next question comes from the line of Chris <unk> of Green Street. Please go ahead.
Chris: Hey, Thanks, good morning.
Speaker Change: Brian going back to the recovery in Maui can you frame, what's embedded in the low and high end of your guidance range for this year.
Chris: Yes.
Chris: Yes.
Chris: What we are expecting is that we continue to have solid group.
Chris: This year, our aces up we have.
Chris: Just to give you a context of the different segments in Maui, We are about 35000 group room nights.
Chris: <unk> is our target for this year and in 2019, we ran at about 37000, so from a group perspective that demand remains strong.
Chris: Maybe a little bit less incentive group than there was before but we're pretty we're pretty happy with with where the group businesses.
Chris: From a leisure standpoint, that's.
Chris: We expect a little bit of a lift in the second half of the year, but if you work in.
Chris: For those very familiar with the island are you.
Chris: For those that have just been to the island and can see is that.
Chris: The heart of the leisure.
Chris: The increase is going to be.
Chris: It's going to be more of a step function kind of poly is now just getting back to.
Chris: Operating base, where they can they are taking group and transient customers.
Chris: That.
Chris: Any sort of temporary living or any of the other things are out of that market now and so that kind of poly has to get its base of business back which will then result in additional airline lift which will then.
Chris: Help on the ticket prices and get more people onto the island, which will bring more people into wildfire.
Chris: So our expectation is that that's going to take a little bit of time, and maybe we see a little bit of that this year and so again <unk> there is spring break and summer.
Chris: Additional travel to the island and that ticks up then that would that would be in excess of where our definitely our midpoint, but maybe even some of our top end of our range too.
Chris: Alright, thank you.
Speaker Change: Your next question comes from the line of Chris <unk> Deutsche Bank. Please go ahead.
Chris: Hey, good morning, guys. Thanks for taking the question.
I was hoping you could talk a little bit about your Renaissance Orlando you guys.
Chris: This success converting the probably of the.
Chris: Renaissance has gotten the portfolio I know you sold a few others.
Chris: This hotel kind of.
Chris: Lower thus far versus your average little bit lower margin.
Chris: Don't see kind of on the 25 capital plan is there is there something to do there longer term.
Chris: Maybe a little bit more or any anything you can do that.
Chris: So on that thanks.
Chris: Yes, sure good morning, Chris.
Speaker Change: What we have found through our two investments and one being a little bit more season than the other.
Chris: Is that <unk>.
Chris: <unk> definitely does does work.
Speaker Change: Depending on the type of hotel and the guest you're going after in and we've always said that our Renaissance hotels have done very well with group customers and maybe not as well with the transient customer when you look at what happened with transient in D C.
Speaker Change: And 24, we went from comparing it back to the last clean year would be 19, but we had a.
Speaker Change: The occupancy index and at the end of 'twenty four for the full year of 113 compared to a transient occupancy index of 89% to 19 with a rate at 117 index compared to a 106.
Speaker Change: Group, we also saw pickup not quite as much but we went from 125 revpar to 119 split between occupancy and rate. So there you are saying.
Speaker Change: It absolutely increased our our transient occupancy a better transient customer at a higher rate which resulted in.
Very solid EBITDA growth in long Beach, where Q4 was just the first quarter of true ramp and we're starting to see that now, but when we look at our.
Speaker Change: Our our transient occupancy index in January compared to <unk>, 22, which was which was a decent year before the renovation.
Speaker Change: We went from 73 now to <unk> 82 in January of.
Speaker Change: This year and our rate index has increased from 95 to 106, so we're starting to see that trade off now.
Speaker Change: <unk> enabled we go after the higher rated Marriott customer.
Speaker Change: It also helps to have.
Speaker Change: Product for both D C and long Beach that is is superior to its competitive set when we look at Orlando Orlando has always been a fantastic group hotel. It has a lot of meeting space and a huge atrium that can serve as meeting space or feeding space also and so we've always done very well.
Speaker Change: Are there and.
Speaker Change: Because of its location in between the two parks, maybe not as strong on the transient side now this year, we do have a new park opening a.
Speaker Change: A mile and a half two miles away, which is much closer than the other parks. So now were much more proximate, including gain proximate to the convention center, so that should help the hotel and then.
If there if we look at that and we think that there is the ability to get a better transient customer at a better transient rate.
Speaker Change: Then we will do.
Speaker Change: Do what we've done in the past and work with our partners over at Marriott and and try to figure out. If there is a brand available because remember it's not just what you want to do it's also what's available in the market.
Speaker Change: And we would we would definitely look at that as far as tier observation to 'twenty five capex is definitely coming down back to normalized amount. So it's not in the plan for.
Speaker Change: 25, but.
Speaker Change: Yes.
Speaker Change: It could definitely be something that we're looking at exploring and maybe.
Speaker Change: If it makes sense, maybe something for down the road.
Speaker Change: Okay very good thanks, Brian.
Speaker Change: Okay.
Speaker Change: Your next question comes from the line of Floris Van Dyke comparison point. Please go ahead.
Speaker Change: Hey, Bryan Thanks.
Speaker Change: <unk>.
Speaker Change: Big picture question.
Speaker Change: Guys are relatively easy company to understand because you got 15 hotels.
Speaker Change: Three hotels generate over 50% of EBITDA.
Obviously and I think also plans for Boston Hotel once it's stabilized.
Speaker Change: As you think about your portfolio construction ideally in in three Years' time.
How do you see that concentration, which you'd like to have fewer hotels that are more means.
Speaker Change: Meaningful or would you like to have more hotels.
Speaker Change: <unk> your income or are you broadly pretty happy with what you have today.
Speaker Change: Good morning for us.
Speaker Change: No. It's a very interesting question and I think the way, we look at the portfolio and.
Speaker Change: One of our main focuses in our strategy is to is to recycle capital in 2024 was.
Speaker Change: It was a challenging year to do that.
Speaker Change: We were able to pick our spot and early in the year here to get a really good transaction done that we're very happy with and very happy with what it's going to look like for the next several years in San Antonio.
Speaker Change: The year turned for the industry.
Speaker Change: As the year moved on and and.
Speaker Change: Being.
Speaker Change: A relatively <unk>.
Smaller company.
Speaker Change: With an incredible balance sheet and great liquidity, we're able to pivot really quickly and take advantage of opportunities and buyback our shares when that makes more sense than than a firing.
Speaker Change: And the transaction market at that time really was not there wasn't a lot happening.
Speaker Change: And then maybe some very large transactions and I think as we.
Speaker Change: So the expectations at the beginning of the year.
Speaker Change: And where things ended up at the end of the year.
Speaker Change: We're happy that we that we didn't.
Speaker Change: Try to stretch to do a transaction because it would have been a mistake and chances are the earnings of the hotel would have been much lower at the end of the year than what we would have thought and so we made the right capital allocation decision at that time.
Speaker Change: In a more functioning transaction environment, which I think we are.
Speaker Change: They're getting to or we're rapidly approaching I think the debt side of the world is very supportive of transactions I think that there is some economic uncertainty that makes things a little bit more difficult, but I think that there is more alignment and in operations. This year.
Speaker Change: In that environment, we're going to want them.
Speaker Change: Churn a portion of our portfolio, we are going to want to take.
Speaker Change: Take take some.
Speaker Change: Yes.
Speaker Change: Wins and get returns on assets that we've invested in and that we're happy with that that is more.
Speaker Change: Importantly, our ability to value add going forward.
Speaker Change: It is going to be limited or would require major outlay.
Speaker Change: Outlays that would take a lot of capital or take a lot of time or a lot of disruption, which we have to be aware of with a portfolio our size and so going forward.
Speaker Change: We would like to accelerate recycling capital and of that.
Speaker Change: I think that that means that we would be at a minimum the same size, but we have some very large assets and at the end of the day, if we could take a large asset and turned it into two assets.
Speaker Change: I think that gives us a little bit more more mass, which helps helps take some of the concentration out of the portfolio to that.
Speaker Change: At the end of the data, we're not afraid of concentration, especially if its in fantastic locations.
Speaker Change: So yes.
Speaker Change: I think to answer your question, Yes, we would want to recycle more.
And that's something that we think we should be doing on an ongoing basis and given the market and.
Speaker Change: Our cost of capital that that makes sense that that's what we'll look to do.
Thanks, just maybe perhaps a slight.
Speaker Change: Would that you've obviously had.
The wildfires in Maui, you've had the strike in.
Speaker Change: In San Diego.
Speaker Change: That probably makes those hotels less able to be recycled because they're both have depressed EBITDA levels relative to the peak.
Speaker Change: Should we can see.
Speaker Change: Do you is recycling other assets.
Speaker Change: As a result of that later on this year.
Speaker Change: Yes.
Speaker Change: We are always in.
Speaker Change: Conversation.
Speaker Change: Yes.
Speaker Change: We're capital Allocators, So we're always talking to people about different hotels in our portfolio and different hotels in their portfolio all the time.
I would.
Speaker Change: Maui is on a recovery.
Speaker Change: On the leisure side.
Speaker Change: <unk> has done very well and and EBITDA is still at or above 19 levels and maybe not as high as it was in 'twenty two but we think we can get a path back to there.
Speaker Change: That's a phenomenal and very valuable and very scarce piece of real estate and so I think that the.
Speaker Change: The value of <unk> <unk>.
Hotel stock is probably maybe a little bit less volatile than than other things. So I wouldn't say that that would preclude.
Speaker Change: Maui is like that.
Speaker Change: It's still a very liquid asset.
Speaker Change: San Diego a bounce back in we're getting the majority of that EBIT back this year in <unk>.
Speaker Change: Phenomenal location next to the Convention center, it's a very efficient hotel.
Speaker Change: And so.
Speaker Change: I think all of our hotels are are always up for for evaluation and I don't see anything being off the table.
Speaker Change: Okay.
Thank you.
Speaker Change: Your next question comes from the line of Patrick Scholes with <unk> Securities. Please go ahead.
Speaker Change: Great sorry, if I just wanted to sneak a question at the end here.
Speaker Change: What do you are you baking in to the midpoint of your guidance as far as total expense growth. Thank you.
Speaker Change: Very sneaky Patrick.
Speaker Change: So.
Speaker Change: Yeah.
Speaker Change: We've mentioned it before is that for total expense growth. We are in the kind of four four and a half range.
Speaker Change: A little bit higher on the paper and then.
Speaker Change: Other big ticket expenses real estate taxes are easing a bit.
Speaker Change: Insurance, we have renewal halfway through the year. So we're still get the benefit of that coming down from last year.
Speaker Change: Our portfolio is pretty well located and has done pretty well. So we don't think that.
Speaker Change: Our renewal will be.
Speaker Change: We'll be anything more than the average this year and then.
Speaker Change: Alright, I think maybe utilities are a little bit higher but I think when you mix all that together were 445.
Speaker Change: Okay that was it thank you.
Brian Giglia: There are no further questions at this time I will now turn the call back over to Brian <unk> for final closing remarks. Please go ahead.
Brian Giglia: I wanted to thank everyone for their time and interest in the company and we look forward to meeting with many of you at upcoming conferences and <unk>.
Brian Giglia: Many of you at upcoming property tour of the Andaz, Miami Beach, which we're very excited to show you.
Brian Giglia: <unk>.
Brian Giglia: Okay.
Speaker Change: Ladies and gentlemen that concludes your conference call. We thank you for participating and ask that you. Please disconnect your lines.
Brian Giglia: Okay.
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