Q1 2025 Host Hotels & Resorts Inc Earnings Call

Two storey rotating restaurant and lounge on the 48th floor of the New York Marriott, Marquis as well would it be a new restaurant on the lobby level of the one hotel South Beach.

We continued to make progress on the condo development at the four seasons resort Orlando at Walt Disney World.

We expect to complete the mid rise condominium building and began closing on sales in the fourth quarter of this year.

We now have deposits and purchase agreements for 16 of the 40 units.

In 2025, our capital expenditure guidance range is $580 million to $670 million.

Madhu: Which includes between 70 and $80 million for property damage reconstruction Madhu.

Madhu: The majority of which we expect to be covered by insurance.

Madhu: Our Capex guidance also reflects approximately $270 million to $315 million of investment or redevelopment repositioning and ROI projects.

Madhu: With the highest transformational capital program, we expect to complete renovations at the Hyatt Regency, Austin and the Hyatt Regency Capitol Hill in the second half of this year.

Madhu: As a reminder, we expect to benefit from approximately $27 million of operating profit guarantees related to the highest transformational capital program. This year.

Madhu: Which we expect will offset the majority of the EBITDA disruption at those properties.

Madhu: Other major ROI projects. This year include the construction of the Phoenician Canyon suites really expansion and they Don sees our ballroom expansion, which we expect to complete in the fourth quarter of 2025.

Madhu: In addition to our capital expenditure investment, we expect to spend $75 million to $85 million on the condo development at the four seasons resort Orlando.

We are reiterating lodging fundamentals has increased.

Based on the information we have today.

We are maintaining our comparable hotel revpar guidance range with a slight reduction to total revpar driven by moderating trends in group lead volume.

So Rob will discuss in more detail below end of our guidance range contemplates a mild slowdown while the high end assumes a more stable macroeconomic environment.

In preparing our guidance, we looked at prior downturns, including the recession in the early 1990, 2008 financial crisis, and the pandemic, which had the most severe impact on the lodging industry.

Madhu: As a result of the wide range of potential economic outcomes. We are also providing an approximate rule of thumb for the current environment based on how our portfolio is positioned today.

Madhu: For every 100 basis point change in Revpar, we would expect to see a 32% to $37 million change in adjusted EBITDA R E.

Madhu: In times like this it is important to remember that host is well positioned to weather any environment and continue to thrive as a result of our fortress investment grade balance sheet.

Madhu: A leverage ratio of two eight times, our access to capital our size and scale.

Madhu: Our diversified business and geographic mix and our continued reinvestment in our portfolio.

Madhu: We will continue to utilize our competitive advantages be disciplined in our capital allocation approach and position host to outperform in the current environment and over the long term.

Sarath: With that I will now turn the call over to Sarath.

Sarath: Thank you Jim and good morning, everyone.

Sarath: Building on Jim's comments I will go into detail on our first quarter operations updated 2025 guidance and our balance sheet.

Sarath: Starting with total revenue trend revpar.

Sarath: Revpar growth outpaced total revpar for the first time in over a year as outsized rate growth driven by special events, who said revpar.

Sarath: Despite challenging comparison group and transient guests continued to increase their out of home spend at our hotels.

Sarath: Comparable hotel food and beverage Revpar grew 5% in the quarter driven by both banquet and alpha.

Sarath: Banquet revenue increased 5% driven by growth in group room nights and contribution per group room night outside of Maui.

Sarath: Results were driven by both Ritz Carlton resort from Naples definition, the New York Marriott, Marquis the Grand Hyatt, Manchester, San Diego and our recently acquired one hotel and embassy suites complex in Nashville.

Sarath: Outlook revenue also grew 5%, resulting from more normalized operations in Maui. The opening of the view restaurant at the New York Marriott, Marquis and the repositioned singer Oceanfront resort.

Sarath: Other revenue per available room grew 2% in the first quarter. Despite a difficult comparison from record levels of attrition and cancellation collected last year.

Sarath: Paul and Paul revenue continued to grow leaving us encouraged that the affluent consumer is still prioritizing spending on premium experiences.

Sarath: Overall transient revpar was up 6% compared to the fourth quarter of 2024, driven by improving leisure transient demand in milk.

Sarath: Outside of Maui transient strength was driven by the reposition finger oceanfront resort the 40 loop Orlando resort at Walt Disney World, The weapon, Carolyn and the foreseeable Jackson hole in fact, the year over year. The four seasons Jackson hole, how transient rate over 2800.

Sarath: While increasing transient rooms sold by 15%.

Sarath: Special events and holidays in the quarter showed meaningful growth.

Sarath: For our five hotels in Washington D. C. Revpar for the inauguration was up an impressive 660% over the same timeframe last year.

Sarath: For Presidents' day weekend, all hotels had double digit revpar growth, resulting in 16% revpar growth for the comparable portfolio.

Sarath: Looking ahead two holidays in the second quarter transient revenue pace is down slightly for memorial day weekend compared to the same time last year and convention hotels have offset to take more group on the books that weekend.

Sarath: Outside of convention hotels transient revenue is pacing up in the mid single digits with Maui pacing up over 30%.

Sarath: July 4th transient revenue pace is also up 4% over last year again, driven by Malibu.

Business transient Revpar was up 2% to the first quarter of 2024, driven by nearly 7% rate growth, while volume was down 5%.

Sarath: We expect business transient revenue remained flat for the remainder of this year as a result of the uncertain macroeconomic environment.

Sarath: Turning to group Rev.

Sarath: Revpar was up 7% year over year, which includes an estimated 200 basis point negative impact from Maui.

Sarath: As expected group room nights were down compared to the first quarter of 2024, driven by recovery in the leaf group room nights in Maui last year, which did not repeat in 2025.

Sarath: Group room night volume was up slightly for the portfolio excluding Maui.

Sarath: Group Revpar growth was driven by broad based corporate group strength across the portfolio as well as association groups.

Sarath: For full year 2025, we have over three 6 million net group room nights on the books.

Sarath: Representing a 12% increase since the fourth quarter.

Jim: As Jim mentioned.

Jim: Total group revenue pace is up three 3% over the same time last year.

Jim: Lead volume has moderated as association in government related groups paused, new bookings due to the heightened uncertainty, but we are encouraged that rates continue to hold across the portfolio for bookings made in the fourth quarter for the rest of 2025.

Jim: We also continue to see strong citywide booking pace in many of our key markets, including San Francisco, New Orleans, San Antonio and Nashville.

Jim: Shifting gears to margins comparable hotel EBITDA margin of 31, 8% was 30 basis points above the first quarter of 2024 as a result of rate driven total revpar growth, which outpaced expense growth.

Jim: We expect year over year margin comparisons to decline as the year progresses, primarily driven by wages and benefits and fixed expense pressures.

Jim: Long side, a modest reduction in total revpar forecast.

Jim: Turning to our outlook for 2025 as Jim discussed we are maintaining our comparable hotel revpar guidance range with a slight reduction to total revpar driven by moderating group lead volume.

Jim: It is important to note that the guidance range. We are providing is based on the information we have today and we remain cautious given the heightened uncertainty.

Jim: As a reminder, we have assumed a gradual improvement at our Maui properties this year and no improvement in the international demand imbalance.

At the low end of our guidance, we have assumed a mild slowdown driven by deteriorating macroeconomic sentiment and a worsening international demand imbalance.

Jim: And at the high end.

Jim: Assumed a more stable macroeconomic environment, driven by clarity on trade policy and improvement in the international demand imbalance.

Jim: Our full year 2025 guidance contemplates comparable hotel revpar growth of between 50 basis points and two 5% over 2024.

Jim: We expect comparable hotel EBITDA margins to be down 160 basis points year over year at the low end of our guidance to down 100 basis points at the highest.

Jim: A 50 basis point improvement over our prior guidance.

Jim: In terms of Revpar growth cadence for the remainder of the year, our guidance reflect quarterly growth in the negative 2%.

Jim: Positive, 1% range with fourth quarter, being stronger and third quarter being weaker.

Jim: As Jim mentioned, given the uncertainty and range of potential outcomes, we are providing an approximate rule of thumb in the current environment based on how the portfolio stands today.

Jim: For modeling purposes, we estimate that every 100 basis point change in Revpar would roughly equate to $832 million to $37 million change in adjusted EBITDA.

Jim: The midpoint assumes comparable hotel revpar growth of 1.5% compared to 2024 on a comparable hotel EBITDA margin of 28%, which is 130 basis points below 2024.

Jim: As we think about bridging our 2024 results for 2025.

Jim: We estimate a 110 basis point impact to full year comparable hotel EBITDA margin from wage and benefit rate increases and a 40 basis point impact from lower business interruption proceeds, which is partially offset by a 20 basis point benefit from operational improvements.

Jim: For the full year, we continue to expect overall wage and benefit expenses to increase over 6%.

Jim: Which comprises approximately 57% of our total hotel operating expenses.

Jim: Our 2025 full year adjusted EBITDA midpoint is $1.645 billion.

Jim: This represents a $25 million or one 5% improvement over our prior guidance midpoint driven entirely by first quarter outperformance.

Jim: It is important to note that we expect to receive additional business interruption proceeds for the <unk> the dark.

Jim: But it is still too early to estimate the timing or amount of any additional payments.

Jim: Our 2025 full year adjusted EBITDA midpoint also include $25 million of estimated EBITDA from the four seasons condo development, which we expect to recognize concurrent with condo sale closings in the fourth quarter.

Jim: Lastly, our midpoint includes an estimated $1 million loss at <unk> and an estimated $13 million contribution from operations at 11 ton of Big sur.

Jim: Of which are excluded from our comparable hotel set in 2025.

Jim: Turning to our fortress balance sheet and liquidity position.

Jim: Weighted average maturity of five years at a weighted average interest rate of four 7%.

Jim: We currently have $2 2 billion and total available liquidity, which includes $264 million of.

Jim: <unk> reserves and $1 5 billion available under the revolver portion of the credit facility.

Jim: Our quarter end leverage ratio was two eight times.

Jim: In April we paid a quarterly cash dividend of <unk> 20 per share.

Jim: As always future dividends are subject to approval by the company's board of directors.

Jim: We will continue to be strategic in managing our balance sheet and liquidity position as we move through the remainder of 2025.

Jim: Wrapping up we believe our investment grade balance sheets, as well as our size scale and diversification uniquely positioned post to successfully navigate an uncertain times, while capitalizing on opportunities for growth in the future.

Jim: With that we.

Jim: We would be happy to take your questions.

Jim: To ensure we have time to address as many questions as possible. Please limit yourself to one question.

Jim: Thank you we will now begin the question and answer session. We would like to ask a question. Please press star one on your telephone keypad to raise your hands and join the queue and if you'd like to withdraw your question I can press star one.

Speaker Change: We also ask that you limit yourself to one question. Your first question comes from the line of Ari Klein with BMO. Please go ahead.

Jim: Thank you.

Ari Klein: So can you talk a little bit more about some of the recent trends you've been seeing.

Ari Klein: In April from a demand standpoint, and then maybe on a market level are you expecting some kind of a divergence in performance in assets in gateway markets that are more exposed to inbound international travel and perhaps you can just talk a little bit more broadly about what you're seeing on that front. Thank you.

Speaker Change: Hi, I'm, sorry, I'll take the <unk>.

Ari Klein: Second part of your question Suraj can take the first part regarding trends.

Speaker Change: Hi.

Speaker Change: The top international the top markets in the country. The top 25 are actually performing really well and if you look through.

Speaker Change: Our first.

Speaker Change: First quarter performance I I know we called out.

Speaker Change: Certain markets with one time events like the inauguration in Washington D C and the Super Bowl in New Orleans.

Speaker Change: And.

Speaker Change: Los Angeles, and New York City in Maui.

Speaker Change: But.

Speaker Change: If you were to exclude those markets, we still had solid revpar performance.

Speaker Change: Throughout the rest of the portfolio so.

Speaker Change: International inbound is.

Speaker Change: About 8% of our total.

Speaker Change: Room nights and you know the the markets that are frankly.

Speaker Change: Frankly, most affected by <unk>.

Speaker Change: Canadian inbound travel or Seattle.

Speaker Change: And New York City, and as you know, we don't have a large presence in Seattle.

Speaker Change: In New York City has just been performing extremely well and I think that can all be.

Speaker Change: Tied back to the transformational renovation that we undertook at the Marriott Marquis.

Speaker Change: During COVID-19.

Speaker Change: In our group business is extremely strong at the Marquis.

Speaker Change: We mentioned it in our prepared comments, we're excited that we have been able to open the view.

Speaker Change: With Danny Meyer Runny.

Speaker Change: Running at I think it's a it's gonna do fantastically well for us.

Speaker Change: So.

Speaker Change: We're not seeing the drag on our portfolio from.

Speaker Change: International inbound that's been talked about across the board I think the.

Speaker Change: There is a divergence clearly today between.

Speaker Change: The top 25 markets and.

Speaker Change: Luxury resorts.

Speaker Change: That we have a lot of as you know.

Speaker Change: And the secondary and tertiary markets at the lower chain scales.

Speaker Change: And we're delighted with that.

Speaker Change: How the portfolio is positioned today.

Speaker Change: And we have seen.

Speaker Change: Strong leisure demand all that's Rob.

Speaker Change: To give you some stats around that.

Speaker Change: In the first quarter.

Speaker Change: Across all of our resorts.

Speaker Change: Yes.

Speaker Change: That's to April.

Speaker Change: We obviously don't have final numbers for April.

Speaker Change: You look at the travel data month to date April for upper tier is up two 5%.

Speaker Change: Luxury is up above that and upper upscale is effectively flat on other timescales I believe is down 3% for our portfolio.

Speaker Change: We are actually trending better than the upper tier performance for April month to date.

Speaker Change: And it's really being driven by our.

Speaker Change: Luxury resort that had a very strong Easter.

Speaker Change: So.

Speaker Change: All in all luxury is holding very strong as we said in our prepared remarks.

Speaker Change: Thank you.

Duane <unk>: Your next question comes from the line of Duane <unk> with Evercore ISI. Please go ahead.

Duane <unk>: Hey, thanks.

Speaker Change: Maui clearly did a little bit better I think than you think can you just talk about your outlook for the remainder of the year.

Speaker Change: I guess, both from a revpar perspective are there any periods that have easier versus tougher comps and then from a profit growth or EBITDA growth perspective. Thank you.

Speaker Change: Oh sure doing so would you look.

Speaker Change: Throughout the year for Maui.

Speaker Change: Obviously Q1 is.

Speaker Change: Very strong core Maui, and so is Q4 Q2 Q3 somewhat moderating.

Speaker Change: But let me walk you through the the Maui the updated Maui Bridge, if you will because we provided that last quarter. So if you remember we had sort of restated our 2020 for EBITDA.

Speaker Change: At $72 million. So that was if you recall $97 million net of last.

Speaker Change: So that $17 million from relief and recovery rooms, and then less $8 million from the one time attrition in cancellation revenue that got us to a restated $72 million number.

Speaker Change: Deduct from that the $7 million for wage and benefit increases in 2025.

Speaker Change: And now you would add to that 30 million to $40 million estimated for the year in terms of improvement in operation.

Speaker Change: Last quarter, we had stated instead of 30 to 40, we updated our estimate at that point in time was 15% to $30 million. So in other words, our expectations for Maui from an EBIT standpoint has gone up by <unk>.

Speaker Change: Approximately $10 million at the midpoint so in essence, our EBITDA projection for Maui currently stands at the midpoint at about $100 million.

Speaker Change: It was.

Speaker Change: Previously what we have said was somewhere around 80 to 95.

Speaker Change: Certainly that has improved I would say majority of that improvement is $10 million is Q1. However, we still anticipate a little bit of continued improvement throughout the year as well.

Speaker Change: Okay very clear thank you.

Chris: Your next question comes from the line of Chris <unk> with Deutsche Bank. Please go ahead.

Chris: Hey, guys good morning.

Jim: Jim you.

Jim: Just kind of set yourself apart from your peers, a little bit coming out of Covid with with a lot of acquisitions.

Jim: <unk> been busy.

Jim: A couple of years and I know, we're not quite even halfway through the year yet but.

Jim: Do you think all the uncertainty in the world.

Jim: Talking about does that in your mind create more opportunities on the acquisition front in the near term.

Chris.

Chris: I wish I had a crystal ball.

Jim: Two really.

Jim: To answer that question in a.

Jim: Precise manner.

Jim: I really don't know, what's going to happen I can only point to what we've done.

Jim: In the past as may be a prelude to how we think about markets and deploying capital in the future.

Jim: But you know there's been a lot of talk all throughout Covid.

Jim: Regarding distress in the markets and that theyre going to be a lot of asset sales and.

Jim: It didn't occur.

Jim: And.

Jim: Based on what we're seeing.

Jim: Certainly within our portfolio from a operating fundamental perspective.

Jim: We hope that that this translates to other owners of hotels as well.

Jim: That the you know that the the big our word.

Ah is a thing of the past and that we see a.

Jim: A shift in policy, which is really causing all the uncertainty out there today.

Jim: And that.

Jim:

Jim: We have other.

Jim: Great things coming out of Washington.

Jim: The tax bill and the budget, though in the second half of the year and that the.

Jim: The economy takes off and the uncertainty goes away so.

Jim: I really think if that does happen and.

Jim: Obviously, it's dependent somewhat upon interest rates.

Jim: You may see a a more active transaction market.

Jim: Pick up later.

Jim: Later, this year, but as of as of today I think the general attitude and mood out. There is everyone is in a wait and see mode. There is just not a lot happening in the transaction market.

Jim: Because of the.

Jim: The uncertainty that exists in a macro basis. So from our perspective, we're going to continue being opportunistic as we deploy capital.

Jim: We'll continue to invest in our portfolio that has served us very well.

Jim: We have seen great results of the.

Jim: 16 Marriott transformational.

Jim: Capital program assets that we completed.

Jim: As well as eight other assets.

Jim: Assets that we have under taken transformational renovations on now we picked up eight nine points in yield index I mean, that's very significant and that flows right to the bottom line.

Jim: We underwrote three to five points, so I think.

Jim: Investing in your assets then smartly is a really good use of capital.

Jim: Buying back stock when we're trading at levels that we are today is also a good use of capital continuing to pay.

Jim: Pay a dividend.

Jim: Is also something that's very important to us so.

Speaker Change: We're in a unique position, Chris given given the balance sheet and the fact that we're sitting here today only two eight times leverage and we have $2 $2 billion of liquidity, we really are around the unique position, where you can do it all.

Chris: Okay very good thanks, Tim.

Speaker Change: Your next question comes from the line of David Katz with Jefferies. Please go ahead.

David Katz: Hi, everyone. Thanks for taking my question.

David Katz: I'm going to sort of follow on this just a little bit.

David Katz: Cause it.

David Katz: In a in a stable operating environment.

David Katz: Without.

David Katz: Any prospects for.

David Katz:

David Katz: Sizable deals and I'm not trying to put words in your mouth and suggests that there arent.

David Katz: But I'd love to get a sense for when you might consider.

David Katz: Returning to <unk>, some more capital through repurchases or other.

David Katz: The other kind of one time events just a thought.

David Katz: Well I think that you will see us.

Continue to be thoughtful about it.

David Katz: <unk>.

David Katz: Repurchasing stock and continuing to pay our dividend David.

David Katz: We went into blackout on March 24th.

David Katz: That was about a week or so before liberation day, when the stock really started to underperform.

David Katz: I think it is safe to say that if we were in a position to buy back additional shares.

David Katz: When when the.

David Katz: The stock price really weakened.

David Katz: Then you would have seen us do that in the marketplace. So we're.

David Katz: We're going to keep one eye on operations as we always do because we have a lot of priorities that are important to the long term growth of this business and into the long term value creation for our shareholders.

David Katz: So.

David Katz: I can't sit here definitively bleed today in and give you a number about.

David Katz: Yeah.

How much we're going to deploy to buy back shares and.

David Katz: You know whether or not we're going to be acquiring assets.

David Katz: You know given the landscape that's out there today.

David Katz: And the fact that there just isn't a lot out there that's exciting so I would just tell you. It's a wait and see approach we'll be opportunistic and.

David Katz: Let's see how the year plays out.

David Katz: Okay. Thank you very much.

Speaker Change: Your next question comes from the line of Shaun Kelley with Bank of America. Please go ahead.

Shaun Kelley: Hi, good morning, everyone and thanks for taking my question.

Jim: Jim I.

Speaker Change: Rob just wanted to go back to the consumer.

Jim: Consumer environment, a little bit you called out a couple of data points that are interesting, which where the.

The bookings on those sort of peak weekends fourth of July Memorial day.

Jim: Which actually sounds pretty encouraging.

Speaker Change: What are you seeing in sort of the off peak periods be at weekday weekend or just sort of you know, particularly for some of the same that same portfolio are you seeing a question is are you seeing a high low dynamic where people are coming at those periods, but a little softer in the shoulders or is it consistent drought just given your mix in at the higher end consumer thanks.

Speaker Change: I would say so far it's still been pretty consistent there hasn't been a meaningful change in trend as we look at our weekday weekend and obviously that does differ from asset to asset and from market to market, but overall there is nothing meaningful that has really shown up.

Speaker Change: That we can sort of speak to and like we said.

Speaker Change: We still have a positive group booking pace.

Speaker Change: Total group revenue pace for the year was at three 3%.

Speaker Change: And that group rate has held you might recall, we have set up the group rate effectively for the full year was at 4% we are effectively still there at three 8%.

Speaker Change: And then leisure as I mentioned earlier has been holding on pretty strong.

Speaker Change: So you know nothing dramatic on the Btu front, yet volume was lower year over year on the BD front about wage was higher and we're pretty much seeing the same thing as we look at April as well so nothing unique there.

Speaker Change: Thank you.

Speaker Change: Your next question comes from the line of Michael Bellisario with Baird. Please go ahead.

Michael Bellisario: Thanks, Good morning, guys.

Speaker Change: Jim a question for you on margins and operations.

Speaker Change: Implemented broader cost cutting initiatives, yet are you, making any staffing staffing changes or kind of any preemptive cuts at this point to manage margin for the remainder of the year.

Speaker Change: Oh.

Speaker Change: Yes.

Speaker Change: The past downturns.

Speaker Change: I have been very instructive and informative Mike I mean, we have that.

Speaker Change: Developed contingency plans a property by property.

Speaker Change: Not on a portfolio wide basis, because each asset is different.

Speaker Change: And are they.

Speaker Change: The plans are or are ready to be.

Speaker Change: Implemented a if and when the need occurs.

Speaker Change: At this point in time with with how the portfolio is performing I mean, we always have an eye on expenses always and I you know I think as Rob mentioned in his remarks that.

Speaker Change: We are at a 20 basis point.

Speaker Change: Operational improvement based on productivity and.

Speaker Change: And actions that we've taken at the property level. So if things are.

Speaker Change: If things were to go south and we're not seeing that today I mean.

Speaker Change: We are not seeing it today I want to emphasize that very very clearly we are very comfortable with the guidance that we're maintaining for the balance of this year.

Speaker Change: But if things were to go South of course, we would be in a position to very quickly.

Speaker Change: Implement our contingency planning and.

And cut expenses.

Speaker Change: As needed across the portfolio.

Speaker Change: Got it thank you.

Speaker Change: Yeah.

Speaker Change: Your next question comes from the line of Chris Darling with Green Street. Please go ahead.

Chris Darling: Hey, Thanks, good morning.

Chris Darling: To what extent is your capex budget for the year at risk given the tariff situation and then how is the current backdrop impacted.

Chris Darling: Impacting your thinking around planned capital projects in future years, and is that really where we might see some risk.

Chris Darling: Yeah, Chris I think it's a little too early to tell exactly how a tariff policy is going to play out.

Chris Darling: We are maintaining our capex guidance.

Chris Darling: As we've discussed today the same numbers that we gave you on the fourth quarter call in.

Chris Darling: In February.

Chris Darling: And we have a diverse group of suppliers.

Chris Darling: For our products.

Chris Darling: Obviously, you know the the tariff risk is is greatest probably whenever you're doing a guestroom given the S. F E.

Chris Darling: That's involved and it becomes a less impactful.

Chris Darling: On other spaces in the hotel.

Chris Darling: We have clearly developed off ramps for.

Chris Darling: As you know is referring to.

Chris Darling: Mike a question on contingency planning from an operational perspective, well you know to be prudent we've developed off ramps for our capital projects if they need your present itself.

Speaker Change: But I.

Speaker Change: I don't I don't anticipate that happening at this point in time.

Speaker Change: Moving full steam ahead with our Hyatt transformational capital program.

Speaker Change: We've completed the.

Speaker Change: The the Grand Hyatt in and Buckhead already this year and we.

Speaker Change: We will be completing the Hyatt Regency Capitol Hill, and the Hyatt Regency Austin this year as well.

So and.

Speaker Change: To answer your question about 2026.

Speaker Change: A little too early to really start talking about the budgeting and what we're thinking about on a capital.

Speaker Change: Basis for for next year, we will do that later in the summer, which is something that we've.

Speaker Change: On a historical basis.

Speaker Change: Understood. Thank you.

Speaker Change: Your next question comes from the line of Jay.

Speaker Change: <unk> corn ranch with Wedbush Securities. Please go ahead.

Speaker Change: Alright. Thanks. Good morning, you commented on the current economic uncertainty leading to visit business transient revpar sufficient to be flat for the year or at the rest of the duration of the year and group new bookings moderating. So I'm wondering if you can just drill a little bit further down.

Speaker Change: More details into those two legs of demand and then specifically on the group side are you seeing the moderation coming in more for the in the year for the year bookings or more as Youre looking out to 2026 bookings and beyond.

Speaker Change: Sure. So when you're looking at group it is really more in the year for the year. So I'm just speaking to lead volume in the year for the year in the quarter for the core.

Speaker Change: For the quarter in the month for the month.

Speaker Change: The lead time is effectively shrinking in other words folks are certainly taking a pause and I would say specifically at government groups, which is not a surprise.

Speaker Change: And associations.

Speaker Change: That's where we are seeing sort of moderation of lead volumes.

Speaker Change: But it's really is a 2025 phenomenon.

Speaker Change: We actually picked up about 470000 group room nights for 2026 through.

Speaker Change: 2028.

Speaker Change: And we are pacing 26 to 28 in the high single digits.

Speaker Change: So it is certainly not as much of a issue for future years, but more so what we're seeing.

Speaker Change: In the year for the year and in the month for the month as well.

Speaker Change: As it relates to business transient like I mentioned earlier Q1 volume was down year over year, we were down about 5% or so in terms of BT room night.

Speaker Change: Majority of that decline I would say a little over 50% was really driven by our government. The government falls under our B T. A room night, our rate was up six 5% for us in Q1.

Speaker Change: And even government rate actually was was up about 4% herself.

Speaker Change: We expect that the volume in our previous guidance, we had anticipated that you would continue to see the steady recovery of BT as we had seen last year right. Now we are assuming that's not going to be the case effectively the decline in volume we saw year over year will continue throughout the year and.

Speaker Change: And we will see a moderate year over year rate increase similar to what we saw in Q1, so effectively not much of a change in BT just given the macroeconomic uncertainty.

Speaker Change: Alright, thank you so much.

Speaker Change: Your next question comes from the line of Jack Armstrong with Wells Fargo. Please go ahead.

Jack Armstrong: Hey, good morning, Thanks for taking the question.

Jack Armstrong: How do you see in the administration's policies now that you've had a few months to see them play out impact you in terms of supply and labor markets are you seeing incremental pressure on margins there and then on the aerosol how have your expectations for tariffs if your full year margin guidance.

Jack Armstrong: With the first part of your question Jack was that regarding supply or was this supply of labor.

Jack Armstrong: Yes labor supply.

Jack Armstrong: Labor supply.

Jack Armstrong: Where we were.

Jack Armstrong: We're fortunate that we have.

Jack Armstrong: The majority of our properties managed by Marriott and Hyatt.

Jack Armstrong: Two.

Jack Armstrong: Really solid.

Jack Armstrong: Solid employers.

Jack Armstrong: That are the.

Jack Armstrong: The people go to because they want to have hospitality as a career and we.

Jack Armstrong: We have not seen any pressure on our on the labor front.

Jack Armstrong: And that's been consistent I mean, we were able to recover coming out of Covid pretty quickly.

Jack Armstrong: And re staff our hotels as needed so.

Jack Armstrong: No issue there whatsoever. So.

Jack Armstrong: You know there is there.

Jack Armstrong: There is no at this point in time.

Jack Armstrong: No indication that the.

Tariffs are going to impact our margins at the hotel level.

Jack Armstrong: We.

Jack Armstrong: We've given you guidance on how we think margins are going to perform over the course of this year.

Jack Armstrong: Of course, if things change then then we will change accordingly, but as we sit here right now.

Jack Armstrong: We're comfortable with the <unk>.

Jack Armstrong: Margin guidance that we provided.

Jack Armstrong: Thank you.

Speaker Change: Your next question comes from the line of Floris Van <unk> with Compass point. Please go ahead.

Hey, Thanks for taking my question Jim.

Speaker Change: Question for you on the transaction market.

Speaker Change:

Speaker Change: We've been hearing some signs that some buyers could be.

Speaker Change: Pulling out of transactions.

Speaker Change: Currently have assets in the markets.

Speaker Change: Do you think it is.

Speaker Change: And in terms of pricing expectation.

Speaker Change: Yeah of course, I I think I got your question, you're breaking up a little bit over your line. It was about the transaction market and Youre hearing the buyers are pulling out of transactions.

Speaker Change: That happens long term.

Speaker Change: Something else Okay. Yeah. So look I think I mentioned it earlier.

Speaker Change: It is a wait and see approach right now for the most part are.

Speaker Change: In the marketplace.

Speaker Change: Sure.

Speaker Change: The MBS market had backed up it had closed down for a period of time, it's it's back now it's open.

Speaker Change: You know.

Speaker Change: So I would expect after we get a little more clarity on policy.

Speaker Change: That.

Speaker Change: And we can get through this period of uncertainty that my.

My expectation would be later in this year that.

Speaker Change: We can see the transaction market continue to.

Speaker Change: Open up and some of the deals that had been out there.

Speaker Change: Yeah that are on pause right now.

Speaker Change: I think that they're likely to get done I think.

Speaker Change: Certain.

Speaker Change:

Buyers of assets that I'm aware of which I'm not at Liberty to speak about not our assets, but other assets in the marketplace.

Speaker Change: Just needed a little more time and it was really.

Speaker Change: Driven by the debt markets not necessarily by the equity markets. So I think pricing is going to depend on.

Speaker Change: The type of asset that you're looking at with with luxury still commanding very high prices and you.

Speaker Change: Upper upscale assets as well a commanding high prices you know what one of the one of the really really positive factors that I don't think we talked about enough.

Speaker Change: That has happened in.

Speaker Change: The hotel space is a very very low levels of new supply.

Speaker Change: We're just not seeing.

Speaker Change: Levels of new supply certainly not in the luxury and upper up upper upscale space, which is where our exposure is and I think that will.

Speaker Change: No drive and in part our pricing for transactions because people are not going to have to worry about.

Speaker Change: Our new luxury resort being built right next to them or another.

Speaker Change: Another upper.

Speaker Change: Abrupt scale, a major city Center hotel.

Speaker Change: <unk> built a.

Speaker Change: As well so I think it's just it's a little too soon to say at this point in time.

Speaker Change: How this is all going to play out but.

Speaker Change: I think it's wait and see across the board.

Speaker Change: The good news is operations are still strong and.

Speaker Change: Hotels are cash flowing and as you know this is a a.

Speaker Change: Hey.

Speaker Change: Policy self made policy issue that is creating all the uncertainty and that can change very quickly that can change on a dime.

Speaker Change: So lets just sit back and see what happens in a run the business. The best we can going forward.

Speaker Change: Are you testing any.

Jim: Assets in the market right now Jim.

Jim: I, we always test assets for us of course, we would not be prudent if we werent testing assets. The good news is for house that we don't have to sell any assets I mean, given the quality of the portfolio that we have and the.

The balance sheet that we have a you know we we are under no stress no pressure to do anything.

Jim: And if we don't get the pricing that we think is appropriate for our assets, we're not going to sell anything it's really that simple.

Jim: So.

We have nothing.

Jim: Nothing of any meaningful size.

Guys out there.

Jim: We've listed with brokers that we've talked to some people.

Jim: On an off market basis about buying assets from us and you know.

Jim: We're very respectful that.

Jim: It's difficult to navigate waters, when you're deploying new capital of a day.

Jim: So again wait and see we'll see how it plays out.

Speaker Change: Thanks, Tim.

Speaker Change: We have time for one more question and that question comes from the line of Smedes Rose with Citigroup. Please go ahead.

Speaker Change: Hi, Thanks, I just wanted to ask you you spoke a lot about Maui, which was really helpful. But just in terms of what youre seeing in Oahu, specifically with the Ritz Carlton.

Turtle buried how is that I guess performing relative to your expectations and any change in kind of your initial underwriting there given no more uncertainty in the market.

Speaker Change: No I think.

Speaker Change: Thank turtle Bay was up 13% in the quarter Smedes Revpar was up 13% at the hotel level.

Speaker Change: You know we have made a decision a strategic decision as you know there.

Speaker Change: There are there are two golf courses there.

Speaker Change: One is the policy of course and the other was the Palm of course, and you may recall from your visit to the island that others are.

Speaker Change: Other party that is developing some residential and they have a there you'll have a lease on the Palmer course, and theyre going to renovate it and do a bunch of different things to it so we.

Speaker Change: We made a decision that we were going to delay.

Speaker Change: The transfer and the Parmer course, and expedite the renovation defazio of course, which we own.

Speaker Change: Today, while we had the opportunity to so it's about a six month delay.

Speaker Change: The hotel itself is performing very well, where we're very happy with what we're seeing in terms of Wahoo performance.

Speaker Change: I'd, just like Maui for for our assets so.

Speaker Change: Nothing nothing but positive news there and we're excited too.

Speaker Change: To get the father of course, a redesigned and put the money that we anticipated we would have to put into it when we bought it done.

Speaker Change: Okay. Thank you.

Speaker Change: That will conclude our question and answer session and I will now turn the conference back over to Jim for closing comments.

Speaker Change: Well. Thank you all for joining US today, we really appreciate the opportunity to discuss our quarterly results with you.

Speaker Change: We look forward to seeing many of you at conferences in the coming months.

Speaker Change: And have a great summer and great rest of the year.

Speaker Change: Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation and you may now disconnect.