Q1 2025 Apple Hospitality REIT Inc Earnings Call

Operator: Greetings and welcome to the Apple Hospitality REIT first quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode.

Greetings and welcome to the Apple Hospitality REIT first quarter 2025 earnings conference call at.

Speaker Change: At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded it is now my pleasure to introduce your host Kelly Clarke Vice Pres.

Operator: A brief question and answer session will follow the formal presentation.

Operator: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

Kelly Clarke: It is now my pleasure to introduce your host, Kelly Clarke, Vice President of Investor Relations. Thank you. You may. Thank you, and good morning.

Speaker Change: <unk> of Investor Relations. Thank you you may begin thank you and good morning, welcome to Apple Hospitality REIT first quarter 2025 earnings call today's call will be based on the earnings release and Form 10-Q, which we distributed and filed yesterday afternoon. Before we begin. Please note that today's call may include.

Kelly Clarke: Welcome to Apple Hospitality REIT's first quarter 2025 earnings. Today's call will be based on the earnings release in Form 10-Q, which we distributed and filed yesterday afternoon.

Kelly Clarke: Before we begin, please note that today's call may include forward-looking statements as defined by federal security. These four looking statements are based on current views and assumptions and, as a result, are subject to numerous risks, uncertainties, and the outcome of future events that could cause actual results, performance, or achievements to materially differ from those expressed, projected, or implied. Any such forward-looking statements are qualified by the risk factors described in our filings with the SEC, including in our 2024 Annual Report on Form 10-K, and speak only as of today. The company undertakes no obligation to publicly update or revise any forward-looking statements, except as required by law.

Speaker Change: Forward looking statements as defined by Federal Securities laws. These forward looking statements are based on current views and assumptions and as a result are subject to numerous risks uncertainties and the outcome of future events that could cause actual results performance or achievements to materially differ from those expressed projected or implied.

Speaker Change: Any such forward looking statements are qualified by the risk factors described in our filings with the SEC, including in our 2024 annual report on Form 10-K and speak only as of today.

Speaker Change: The company undertakes no obligation to publicly update or revise any forward looking statements, except as required by law.

Kelly Clarke: In addition, non-GAAP measures of performance will be discussed during this call. Reconciliations of those measures to GAAP measures and definitions of certain items referred to in our remarks are included in yesterday's earnings release and other filings with the SEC.

Speaker Change: In addition, non-GAAP measures of performance will be discussed during this call reconciliations of those measures to GAAP measures and definitions of certain items referred to in our remarks are included in yesterday's earnings release and other filings with the SEC for.

Kelly Clarke: For a copy of the earnings release or additional information about the company, please visit applehospitalityreit.com.

Speaker Change: For a copy of the earnings release or additional information about the company. Please visit Apple hospitality REIT Dot com.

Kelly Clarke: This morning, Justin Knight, our Chief Executive Officer, and Liz Perkins, our Chief Financial Officer, will provide an overview of our results for the first quarter 2025 and an operational outlook for the rest of the year. Following the overview, we will open the call for Q&A.

Speaker Change: This morning, Justin Knight, our Chief Executive Officer, and Liz Perkins, Our Chief Financial Officer will provide an overview of our results for the first quarter 2025, and an operational outlook for the rest of the year. Following the overview, we will open the call for Q&A at this time. It is my pleasure to turn the call over to Justin.

Justin Knight: At this time, it is my pleasure to turn the call over to Good morning and thank you for joining us for our first quarter 2025 earnings call. Although a variety of factors weighed on hotel performance during the first quarter of this year, we continue to see solid demand across our portfolio, with growth in rate largely offsetting a slight pullback in occupancy. Our portfolio of rooms focus hotels is broadly diversified across 85 different markets with exposure to a wide variety of demand generations. For the first quarter, Comparable Hotels REBPAR was $111. a decline of 0.5% as compared to the first quarter of 2024.

Speaker Change: Good morning, and thank you for joining us for our first quarter 2025 earnings call.

Speaker Change: Although a variety of factors weighed on hotel performance during the first quarter of this year, we continued to see solid demand across our portfolio with growth in rates largely offsetting a slight pull back in occupancy.

Speaker Change: Our portfolio of rooms focused hotels is broadly diversified across 85 different markets with exposure to a wide variety of demand generators.

Speaker Change: For the first quarter comparable hotels Revpar was $111 a.

Speaker Change: The decline of <unk>, 5% as compared to the first quarter of 'twenty 'twenty four.

Justin Knight: occupancy was 71% down 1.5% to the first quarter 2024 and ADR was $157 up 1% as compared to the same period last year. In response to demand shifts in some of our markets, our corporate team, together with our third-party management companies, has been working to further optimize the mix of business at our hotels in order to strengthen market share in the current environment. Our hotels operate efficiently and produce strong cash flow while simultaneously providing guests traveling for both business and leisure with a compelling value proposition. While variable expense growth has moderated, bottom-line performance for the quarter was down slightly, driven primarily by higher fixed costs and lower-than-expected top-line growth.

Speaker Change: Occupancy was 71% down one 5% for the first quarter 2024, and ADR was $157 up 1% as compared to the same period last year.

Speaker Change: In response to demand shifts in some of our markets our corporate team together with our third party management companies has been working to further optimize the mix of business at our hotels in order to strengthen market share in the current environment.

Speaker Change: Our hotels to operate efficiently and produce strong cash flow, while simultaneously, providing gas traveling for both business and leisure with a compelling value proposition.

Speaker Change: While variable expense growth has moderated bottomline performance for the quarter was down slightly driven primarily by higher fixed costs and lower than expected top line growth adjusted.

Justin Knight: Adjusted EBITDA REIT was $95 million, down approximately 5% to the first quarter of 2024. And modified funds from operations was approximately $76 million, down 9% as compared to the first quarter of 2024. Looking forward, we have tempered full year guidance based on our performance during the first quarter and an expectation that current demand and expense trends could continue in the near term, with some improvement in market share relative to the first quarter as we move into the back half of the year. The fundamentals of our business remain strong, and our revised guidance, while lower than initial projections, does not contemplate a near-term recession.

Speaker Change: Adjusted EBITDA already was $95 million down approximately 5% of the first quarter of 2024 and modified funds from operations was approximately $76 million down 9% as compared to the first quarter 'twenty 'twenty four.

Speaker Change: Looking forward, we have tempered our full year guidance based on our performance during the first quarter and an expectation that current demand and expense trends could continue in the near term with some improvement in market share relative to the first quarter as we move into the back half of the year.

Speaker Change: The fundamentals of our business remains strong and our revised guidance, while lower than initial protections does not contemplate a near term recession.

Justin Knight: Our portfolio has historically outperformed during periods of economic uncertainty, and we believe we are well positioned to capitalize on potential upside should we see re-acceleration in broader economic growth. Supply and demand dynamics for our business continue to be favorable. The supply growth for our industry has generally been muted, and with recent disruption in markets and uncertainty related to potential impact of tariffs, new construction starts have further slowed. At the end of the first quarter, nearly 60% of our hotels did not have any new upper upscale, upscale, or upper midscale product under construction within a five-mile radius.

Speaker Change: Our portfolio has historically outperformed during periods of economic uncertainty and we believe we are well positioned to capitalize on potential upside should we see reacceleration in broader economic growth.

Speaker Change: Okay.

Speaker Change: Supply demand dynamics for our business continued to be favorable.

Speaker Change: Supply growth for our industry has generally been muted its recent disruption in markets and uncertainty related to potential impact of tariffs new construction starts are further slowed.

Speaker Change: At the end of the first quarter nearly 60% of our hotels did not have any new upper upscale and upscale or upper mid scale product under construction within a five mile radius.

Justin Knight: We continue to believe that limited supply growth in our markets materially improves the overall risk profile of our portfolio by both reducing potential downside and enhancing the upside impact of variability in launching demand relative to past cycles. Supported by our strong operating performance, we continue to pay an attractive dividend. During the first quarter, we paid distributions totaling approximately $70 million, or $0.29 per share, which includes a special cash distribution of $0.05 per common share that was paid in January. Based on Wednesday's closing stock price, our annualized regular monthly cash distribution of $0.96 per share represents an annual yield of approximately 8.2%.

Speaker Change: We continue to believe that limited supply growth in our markets materially improves the overall risk profile of our portfolio by both reducing potential downside and enhancing the upside impact of variability in march into bad relative to past cycles.

Speaker Change: Supported by our strong operating performance, we continue to pay an attractive dividend during.

Speaker Change: During the first quarter, we paid distributions totaling approximately $70 million or 29 per share which includes the special cash distribution of five per common share that was paid in January.

Speaker Change: Based on Wednesday's closing stock price, our annualized regular monthly cash distribution of <unk> 96 per share represents an annual yield of approximately eight 2%.

Justin Knight: Together with our Board of Directors, we will continue to monitor our distribution rate and timing relative to the performance of our hotels and other potential uses of capital. We are disciplined in our approach to capital allocation, seeking opportunities to refine and enhance our existing portfolio, drive earnings per share, and maximize long-term value for our shareholders. Since the beginning of this year, we have completed the sale of two hotels for a combined sales price of approximately $21 million. entered into an agreement for the sale of our Houston Marriott for $16 million, entered into a contract for the purchase of the Homewood Suites Tampa Brandon for approximately $19 million, repurchased approximately $32 million of our common shares, and paid distributions of nearly $89 million.

Speaker Change: Together with our board of Directors, we will continue to monitor our distribution rate and timing relative to the performance of our hotels and other potential uses of capital.

Speaker Change: We are disciplined in our approach to capital allocation seeking opportunities to refine and enhance our existing core player drive earnings per share and maximize long term value for our shareholders.

Speaker Change: Since the beginning of this year, we have completed the sale of two hotels for a combined sales price of approximately $21 million entered into an agreement for the sale of our Houston Marriott for $16 million entered into a contract for the purchase of the Homewood suites, Tampa, Brandon for approximately $19 million repurchased approximately $32 million of our <unk>.

Speaker Change: Common shares.

Speaker Change: And paid distributions of nearly $89 million, all while maintaining the strength and flexibility of our balance sheet.

Justin Knight: all while maintaining the strength and flexibility of our balance. While the transaction market continues to be challenging, with industry deal volume remaining at historical lows and down meaningfully year over year, we have successfully executed on select asset sales in ways to continue to optimize our portfolio concentration in specific markets. In February, we completed the sale of the Homewood Suites in Chattanooga for approximately $8 million. In March, we sold the Spring Hill Suites in Fishers, Indiana for nearly $13 million. And this summer, we expect to complete the sale of our full-service Marriott in Houston for $16 million.

Speaker Change: While the transaction market continues to be challenging with industry deal volume remaining at historical lows and down meaningfully year over year, we have successfully executed on select asset sales and ways to continue to optimize our portfolio concentration in specific markets.

Speaker Change: In February we completed the sale of the Homewood suites in Chattanooga for approximately $8 million in March we saw the Springhill suites in fishers, Indiana for nearly $13 million.

Speaker Change: And this summer we expect to complete the sale of our full service Marriott in Houston for $16 million.

Justin Knight: While pricing for the individual hotels varies, as a group, the three hotels will trade at a sub-7% cap rate, or a 12.1 times EBITDA multiple before CapEx, and a sub-5% cap rate, or a 16.7 times EBITDA multiple after taking into consideration the estimated $14 million in required capital improvements. Proceeds from these sales were used primarily to fund, share repurchases, and reduce debt. Since the beginning of the year, through April, we have repurchased approximately 2.4 million of our shares at a weighted average market purchase price of approximately $13.32 per share for an aggregate purchase price of approximately $32.3 million.

Speaker Change: While pricing for the individual hotels ferries as a group the three hotels will trade at a sub 7% cap rate. We're at $12, one times EBITDA multiple before capex and a sub 5% cap rate or a 16 seven times EBITDA multiple after taking into consideration the estimated $14 million and required capital improvements.

Speaker Change: Yes.

Speaker Change: Proceeds from these sales were used primarily to fund share repurchases and reduced debt.

Speaker Change: Since the beginning of the air through April we have repurchased approximately $2 4 million of our shares at a weighted average market purchase price of approximately $13 32 per share for an aggregate purchase price of approximately $32 $3 million.

Speaker Change: Shares repurchased year to date had been priced at around a two turns Brad to recent dispositions and around a fixed term EBITDA multiple spread after taking into consideration required capital investments.

Justin Knight: Shares repurchased year-to-date have been priced at around a two-turn spread to recent dispositions and around a six-turn EBITDA multiple spread after taking into consideration required capital investment. We currently have two hotels under contract for purchase, including the Mottabai Hilton, which is under construction in downtown Nashville for approximately $98 million. This asset is being developed under a fixed price contract and we anticipate acquiring this hotel upon the completion of construction later this year. During the quarter, we entered into a contract for the purchase of 126-room Homewood Suites Tampa Brandon. for approximately $19 million. The hotel is located adjacent to our embassy suites and represents a unique opportunity to expand our ownership in a sub market that continues to perform well for us with a strong going in yield and operational uptake.

Speaker Change: We currently have two hotels under contract for purchase including the motto bite Hilton, which is under construction in downtown Nashville for approximately $98 million. This asset is being developed under a fixed price contract and we anticipate acquiring this hotel upon the completion of construction later this year.

Speaker Change: During the quarter, we entered into a contract for the purchase of 126 room Homewood suites Tampa Brandon.

Speaker Change: For approximately $19 billion. The hotel is located adjacent to our embassy suites and represents a unique opportunity to expand our ownership in a sub market that continues to perform well for us with a strong going in yield and operational upside.

Justin Knight: The purchase price represents a 12% cap rate on trailing 12-month numbers and a high single-digit cap rate on in-place cash flow after all anticipated capital expenditures and without giving consideration for operational synergies and upside post-renovation. Assuming all conditions to closing are met, we anticipate acquiring this hotel later in the second quarter. Since the onset of the pandemic, we have completed approximately $338 million in hotel sales, with an additional $16 million under contract and expected to close during the third quarter of this year. These sales have allowed us to forego over $100 million in capital investments and have been completed at a blended 5% cap rate prior to taking into consideration necessary CapEx and a sub-4% cap rate after CapEx.

Speaker Change: The purchase price represents a 12% cap rate on trailing 12 month numbers in a high single digit cap rate on in place cash flow after all anticipated capital expenditures and without giving consideration for operational synergies and upside post renovation.

Speaker Change: Assuming all conditions to closing are met we anticipate acquiring this hotel later in the second quarter.

Speaker Change: Yeah.

Speaker Change: Since the onset of the pandemic, we have completed approximately $338 million in hotel sales with an additional 16 million under contract and expected to close during the third quarter of this year.

Speaker Change: These sales have allowed us to forgo over $100 million in capital investments and had been completed at a blended 5% cap rate prior to taking into consideration necessary capex in a sub 4% cap rate after capex.

Justin Knight: Over the same period, we have invested a billion dollars in new acquisitions while maintaining the strength of our balance.

Speaker Change: Over the same period, we have invested $1 billion of new acquisitions, while maintaining the strength of our balance sheet.

Justin Knight: These transactions have further enhanced our already well-positioned portfolio by lowering the average age, lifting overall portfolio performance, helping to manage near-term CapEx Thank you all for joining us today. Our recent acquisition and disposition activity, along with our share issuance in 2023 and more recent share repurchase. Demonstrate our ability to adjust tactical strategy to account for changing market conditions. And underscore our track record of acting on opportunities at optimal times in the cycle to maximize total returns for our shareholders.

Speaker Change: These transactions have further enhanced our already well positioned portfolio by lowering the average age lifting overall portfolio performance, helping to manage near term capex needs, increasing exposure to high growth markets and positioned us to continue to benefit from near term economic and demographic trends.

Speaker Change: Our recent acquisition and disposition activity, along with our share issuance in 2023 and more recent share repurchases demonstrate our ability to adjust tactical strategy to account for changing market conditions and underscore our track record of acting on opportunities at an optimal times in the cycle to maximize total returns for our shareholders.

Justin Knight: Should our stock remain at a meaningful discount to values we can achieve in private market transactions, we will continue to opportunistically sell assets and redeploy proceeds primarily into additional share repurchase. As we have demonstrated over our long history in the lodging industry, we will monitor the market and adjust our focus appropriately as conditions change. We are confident opportunistic transactions like these will further drive long-term value for our shareholders.

Speaker Change: Should our stock remains at a meaningful discount to values. We can achieve in private market transactions. We will continue to opportunistically sell assets and redeploy proceeds primarily into additional share repurchases.

Speaker Change: As we have demonstrated over a long history in the lodging industry, we will monitor the market and adjust our focus appropriately as conditions change.

Speaker Change: We are confident opportunistic transactions like these will further drive long term value for our shareholders.

Speaker Change: Okay.

Justin Knight: We expect to reinvest between $80 and $90 million in our hotels during 2025, with major renovations at approximately 20 of our hotels. Reinvestments in our portfolio are a key component of our overall strategy and ensure that our hotels remain competitive in their respective markets to further drive e-biz agriculture. First quarter capital expenditures were approximately $20 million. We are closely monitoring the potential impact of tariffs, which may result in increased costs and delays for some of our planned projects. But there are no known delays at this time. Our experience team is focused on leveraging our scale ownership to control costs, maximize impact of dollars spent, and implement projects during periods of seasonally lower demand to minimize revenue displacement.

Speaker Change: We expect to reinvest between $80 million to $90 million in our hotels during 2025 with major renovations at approximately 20 of our hotels Ria.

Speaker Change: <unk> investments in our portfolio are key component of our overall strategy and assure that our hotels remain competitive in their respective markets to further drive EBITDA growth.

Speaker Change: First quarter capital expenditures were approximately $20 million and we are closely monitoring the potential impact of tariffs, which may result in increased costs and delays for some of our plant projects that there are no known delays at this time.

Speaker Change: Our experienced team is focused on leveraging our scale ownership to control costs maximize impact of dollar spent and implement projects during periods of seasonally lower demand to minimize revenue displacement.

Justin Knight: We entered 2025 anticipating the potential for a wide range of possible macroeconomic scenarios, and we're prepared to adjust the operational and capital allocation priorities according.

We entered 2025 anticipating the potential for a wide range of possible macroeconomic scenarios and we're prepared to adjust operational and capital allocation priorities accordingly.

Justin Knight: This year, we celebrate 25 years in the hospitality industry and 10 years since our listing on the New York Stock Exchange. Throughout our history, we have worked to refine our strategy, intentionally choosing to invest in high-quality hotels that appeal to a broad set of business and leisure customers. diversifying our portfolio across markets and demand.

Speaker Change: This year, we celebrate 25 years in the hospitality industry and 10 years since our listing on the New York Stock Exchange.

Speaker Change: Throughout our history, we have worked to refine our strategy intentionally choosing to invest in high quality hotels that appeal to a broad set of business and leisure customers diversifying our portfolio across markets and demand generators, maintaining a strong and flexible balance sheet with low leverage and reinvesting in our hotels and champion our corporate team and the associated.

Justin Knight: maintaining a strong and flexible balance sheet with low leverage, reinvesting in our hotels and champion our corporate team and the associates and management teams who operate our Our differentiated strategy has been tested and proven across multiple economic cycles. The strength of our broadly diversified portfolio, the overall stability of our business, our low leverage, and the depth of our team, we are confident that we are well positioned to drive profitability and maximize long-term value for our shareholders in any macroeconomic environment.

Speaker Change: And management teams, who operate our hotels.

Our differentiated strategy has been tested and proven across multiple economic cycles.

Speaker Change: With the strength of our broadly diversified portfolio. The overall stability of our business, our low leverage and the depth of our team. We are confident that we are well positioned to drive profitability and maximize long term value for our shareholders in any macroeconomic environment.

Liz Perkins: It is now my pleasure to turn the call over to Liz for additional details on our balance sheet, financial performance during the quarter, and outlook for the remainder of the year. Thank you, Justin, and good morning. While the first quarter of this year was impacted by a variety of factors, demand for our hotels remained generally solid, driving strong, absolute performance. For the quarter, Comparable Hotels total revenue was $324 million, down 0.4% to the first quarter 2024, and Comparable Hotels Adjusted Hotel EBITDA was $105 million, down approximately 5% to the first quarter 2024. First quarter Comparable Hotels REVPAR was $111, down 0.5%, ADR was $157, up 1%, and occupancy was 71%, down 1.5% as compared to the first quarter 2024.

Speaker Change: It is now my pleasure to turn the call over to Liz for additional details on our balance sheet financial performance during the quarter and the outlook for the remainder of the year.

Liz Perkins: Thank you Justin and good morning.

Liz Perkins: The first quarter of this year was impacted by a variety of factors demand for our hotels remains generally solid driving strong absolute performance.

Liz Perkins: For the quarter comparable hotel total revenue was $324 million down <unk>, 4% to the first quarter 2024, and comparable hotels adjusted hotel EBITDA was $105 million down approximately.

Liz Perkins: <unk>, 5% to the first quarter of 2024.

Liz Perkins: First quarter comparable hotels, Revpar was $111 down <unk>, 5%.

Liz Perkins: <unk> was $157 up 1% and occupancy was 71% down one 5% as compared to the first quarter 2024.

Liz Perkins: In January and February, many of our markets throughout the Sunbelt region experienced extreme winter weather conditions, which negatively impacted travel demand. Our Southern California hotels, which benefited early in the quarter from wildfire-related recovery business, lifting overall portfolio results, experienced softer demand than was anticipated in the back half of the quarter. In March, the pullback in government travel became evident in a number of our markets, and heightened macroeconomic uncertainty began weighing on travel demand. Despite these challenges, demand remained healthy across our portfolio, and we continue to see strength in absolute occupancy and rate. The pullback in government travel did not impact all markets equally.

Liz Perkins: In January and February many of our markets throughout the Sunbelt region experienced extreme winter weather conditions, which negatively impacted travel demand.

Liz Perkins: Our southern California, hotels, which benefited early in the quarter from wildfire related recovery business lifting overall portfolio result experienced softer demand than was anticipated in the back half of the quarter.

Liz Perkins: In March the pullback in government travel became evident in a number of our markets and heightened macroeconomic uncertainty again weighing on travel demand.

Liz Perkins: Despite these challenges demand remained healthy across our portfolio and we continue to see strength in absolute occupancy and rate.

Liz Perkins: Back in government travel did not impact our markets equally 32 of our markets grew government occupancy mix for the first quarter and overall government as a percent of mix remained relatively consistent with the same period of last year. Despite increased cancellations as we moved through March.

Liz Perkins: Thirty-two of our markets grew government occupancy mix for the first quarter, and overall government as a percent of mix remained relatively consistent with the same period of last year, despite increased cancellations as we moved through March. Government demand typically represents between 5% and 6% of our overall business mix and has stabilized over the past month closer to the lower end of that range. In many of our more effective markets, our teams have been successful in adjusting the mix of business in our hotels to compensate for the change. While it is often difficult to determine underlying demand trends in the first quarter of the year, this year has been particularly difficult, with the added macroeconomic volatility and challenging calendar comparison, but there are some highlights for the quarter.

Liz Perkins: Government demand typically represents between five and 6% of our overall business mix and has stabilized over the past months closer to the lower end of that range and many of our more affected markets. Our teams have been successful in adjusting the mix of business in our hotels to compensate for the change.

Liz Perkins: While it is often difficult to determine underlying demand trends in the first quarter of the year. This year has been particularly difficult with the added macroeconomic volatility and challenging calendar comparison, but there are some highlights for the quarter. Our Houston properties grew revpar at almost 8% during the quarter benefiting from a strong <unk>.

Liz Perkins: Our Houston properties grew REBPAR almost 8 percent during the quarter, benefiting from a strong convention calendar and market-wide corporate expansion and job growth, as well as an easier year-over-year renovation comp at our West Energy Residence Inn. Our Los Angeles hotels grew REVPAR over 20% with fire recovery business bolstering the performance early in the quarter. The Super Bowl benefited our New Orleans Hotel, which also saw over 20% growth during the quarter. Our Richmond hotels saw growth in crew, group, and business transient, which enabled our three hotels and market to grow REVPAR almost 8%. Our hotels in Salt Lake City performed incredibly well during the quarter, achieving almost 10% REVPAR growth despite a softer ski season and renovation displacement in one of our hotels.

Liz Perkins: Pension calendar and market wide corporate expansion and job growth as well as an easier year over year renovation comp at our west energy residents in.

Liz Perkins: Our Los Angeles hotels grew revpar over 20% with fire recovery business bolstering the performance early in the quarter.

Liz Perkins: The Super Bowl benefitted, our New Orleans Hotel, which also saw over 20% growth during the quarter.

Our Richmond hotel stopped growth in CRU group and business transient, which enabled our three hotels in market to grow revpar at almost 8%.

Liz Perkins: Our hotels in Salt Lake City performed incredibly well during the quarter, achieving almost 10% revpar growth. Despite a softer ski season and renovation displacement in one of our hotels.

Liz Perkins: We are especially excited about the Salt Lake City market. The city is expected to continue to benefit from a strong convention calendar, professional sporting events, and continued growth in business transient. Based on preliminary results for the month of April 2025, Comparable Hotels REVPAR declined by approximately 3.5% as compared to the month of April 2024, with year-over-year growth in rate and occupancy following the negative impact of the shift in timing of the Easter holiday. Last weekend, we saw double-digit REVPAR growth year over year for both Friday and Saturday nights, with Saturday's portfolio occupancy reaching 90%. Turning back to the first quarter, same-store day-over-day trends showed a pullback in leisure, business, and government-related travel, which all contributed to the first-quarter occupancy decline year-over-year.

Liz Perkins: We are especially excited about the salt Lake City market. The city is expected to continue to benefit from a strong convention calendar professional sporting events and continued growth in business transient.

Liz Perkins: Based on preliminary results for the month of April 2025, comparable hotels Revpar declined by approximately three 5% as compared to the month of April 2024 with year over year growth in rate and occupancy following the negative impact of the shift in timing of the Easter holiday.

Liz Perkins: Last weekend, we saw double digit revpar growth year over year for both Friday, and Saturday night, with Saturday's portfolio occupancy reaching 90%.

Liz Perkins: Turning back to the first quarter same store day over day trends showed a pullback in leisure business and government related travel, which all contributed to the first quarter occupancy declined year over year.

Liz Perkins: Weekend occupancy improved as the quarter progressed and was positive year-over-year in March at 1.3 percent after being down 4.2 percent in January and down 2 percent in February. Weekday occupancy declines year over year improved throughout the quarter, down 3.5% in January, down 1.8% in February, and down 1.7% in March. Both weekend and weekday ADR increased by 1% for the quarter, partially offsetting lower occupancy. Same-store room-night channel mix year-over-year remained relatively stable, with Brand.com bookings at 40 percent, OTA bookings down 80 basis points to 11 percent, Property Direct improved by 110 basis points to 26 percent, and GDS bookings were in line representing 18% of our mix.

Liz Perkins: Weekend occupancy improved as the quarter progressed and with positive year over year in March at one 3% after being down four 2% in January and down 2% in February.

Liz Perkins: Weekday occupancy declines year over year improved throughout the quarter down three 5% in January down one 8% in February and down one 7% in March.

Liz Perkins: Weekend and weekday ADR increased by 1% for the quarter, partially offsetting lower occupancy.

Liz Perkins: Same store room night channel mix year over year remained relatively stable with brand dot com bookings at 40%.

Liz Perkins: Bookings down 80 basis points to 11% property direct improved by 110 basis points to 26%.

Liz Perkins: GBS bookings were in line, representing 18% of our mix.

Liz Perkins: We are pleased to see the improvement in Property Direct Business, which is a direct reflection of the focused sales efforts of our on-site and above-property commercial team. First quarter same store segmentation was largely consistent with the first quarter of 2024. Bar remained strong but decreased by 90 basis points to 33%. Other discounts represented 27% of our occupancy mix. Group increased by 140 basis points to 17%. Corporate and local negotiated business represented 17% of our mix, down 40 basis points, and government down only 30 basis points year over year with 5% of our mix. On a comparable basis, we continue to see growth in other revenues, which were up 9% during the quarter, driven primarily by parking revenue.

Liz Perkins: We are pleased to see the improvement in property direct business, which is a direct reflection of the focused sales effort of our onsite and above property commercial teams.

Liz Perkins: First quarter same store segmentation was largely consistent with the first quarter of 2024.

Liz Perkins: <unk> remained strong but decreased by 90 basis points to 33% other discounts represented 27% of our occupancy Max group increased by 140 basis points to 17%.

Liz Perkins: Corporate and local negotiated business represented 17% of our mix down 40 basis points and government down only 30 basis points year over year with 5% of our mix.

Liz Perkins: On a comparable basis, we continue to see growth in other revenues, which were up 9% during the quarter driven primarily by parking revenue.

Liz Perkins: Turning to expenses, comparable hotels total hotel expenses increased by 2.2% for the first quarter as compared to the first quarter of last year, or 4% on a CPOR base. Total payroll per occupied room for our same-store hotels was $42 for the quarter, up 4% to the first quarter 2024, driven by food and beverage and overhead, salaries and benefits, while rooms wages were well-controlled and up only 1% year-over-year on a per-occupied room basis. We continue to achieve reductions in contract labor, which decreased during the quarter to 7.1% of total wages, down 160 basis points, or 18% versus the same period in 2024.

Liz Perkins: Turning to expenses comparable hotel total hotel expenses increased by 2.2% for the first quarter as compared to the first quarter of last year or 4% on a CPR basis.

Liz Perkins: Total payroll per occupied room for our same store hotels with $42 for the quarter up 4% to the first quarter 2024, driven by food and beverage and overhead salaries and benefits while rooms wages were well controlled and up only 1% year over year on a per occupied room basis.

Liz Perkins: We continue to achieve reductions in contract labor, which decreased during the quarter to seven 1% of total wages down 160 basis points or 18% versus the same period in 2024.

Liz Perkins: Comparable hotels, variable hotel expenses increased by only 1.6% in the first quarter, benefiting from operating expenses, which were up less than 1% and hotel admin costs, which were flat compared to the first quarter of 2024. While our management teams were able to manage most variable expenses in response to lower occupancy, utilities and fixed expenses remained a headwind for the quarter. Comparable hotels utilities expense was up 9% and same store property taxes grew 8% with increases in select markets and more favorable appeal adjustment in the first quarter of 2024. Insurance was also a challenge as expected, driven by an increase in general liability insurance premiums upon renewal in the fourth quarter, though we anticipate some relief moving forward from a favorable property insurance renewal this quarter.

Liz Perkins: Comparable hotel variable hotel expenses increased by only one 6% in the first quarter.

Liz Perkins: Fitting from operating expenses, which were up less than 1% and hotel admin costs, which were flat compared to the first quarter of 2024.

Liz Perkins: While our management teams were able to manage most variable expenses in response to lower occupancy utilities and fixed expenses remained a headwind for the quarter.

Liz Perkins: Okay.

Liz Perkins: Comparable hotels utilities expense was up 9% and same store property taxes grew 8% with increases in select markets and more favorable appeal adjustment in the first quarter of 2024.

Liz Perkins: Insurance with also a challenge as expected driven by an increase in general liability insurance premiums upon renewal in the fourth quarter. So we anticipate some relief moving forward from a favorable property insurance renewal this quarter.

Liz Perkins: We achieved Comparable Hotels Adjusted Hotel EBITDA of approximately $105 million for the first quarter, down approximately 5% to the first quarter 2024. We are especially pleased with our Comparable Hotels Adjusted Hotel EBITDA Margin of 32.3% for the first quarter, down 180 basis points as compared to the first quarter, 2024, a decline which was within our previously provided guidance range, despite top line being below that guidance range, highlighting our team's ability to manage costs in a challenging environment. Adjusted EBITDA REIT was approximately $95 million for the quarter, down approximately 5% as compared to the first quarter of 2024.

Liz Perkins: We achieved comparable hotels adjusted hotel EBITDA of approximately $105 million for the first quarter down approximately 5% to the first quarter 2024.

Liz Perkins: We are especially pleased with our comparable hotels adjusted hotel EBITDA margin of 32, 3% for the first quarter down 180 basis points as compared to the first quarter 2024, a decline which was within our previously provided guidance range, despite topline being below that guidance range, highlighting our team's ability to manage.

Liz Perkins: Costs in a challenging environment.

Liz Perkins: Adjusted EBITDA was approximately $95 million for the quarter down approximately 5% as compared to the first quarter 2024.

Liz Perkins: MSFO for the quarter was approximately $76 million and $0.32 per share, down approximately 6% on a per share basis as compared to the first quarter 2024. Looking at our balance sheet, as of March 31, 2025, we had approximately $1.5 billion of total outstanding debt, approximately 3.3 times our trailing 12-month EBITDA, with a weighted average interest rate of 4.8 percent. At quarter end, our weighted average debt maturities were approximately 2 years. We had cash on hand of approximately $15 million, availability under our revolving credit facility of approximately $500 million, and approximately 72 percent of our total debt outstandings was fixed or hedged.

Liz Perkins: <unk> for the quarter was approximately $76 million.32 per share down approximately 6% on a per share basis as compared to the first quarter 2024.

Liz Perkins: Looking at our balance sheet as of March 31, 2025, we had approximately $1 5 billion of total outstanding debt approximately three three times, our trailing 12 months EBITDA with a weighted average interest rate of four 8% at quarter end, our weighted average debt maturities were approximately two years, we had cash.

Liz Perkins: On hand of approximately $15 million availability under our revolving credit facility of approximately $500 million and approximately 72% of our total debt outstanding was fixed or hedged.

Liz Perkins: In April, the company repaid in full one secured mortgage loan for a total of approximately $7 million, bringing the number of unencumbered hotels in the company's portfolio as of April 30, 2025, to 207. We have two mortgage loans totaling $56 million that will mature in the second and fourth quarter and term loans totaling $225 million that mature in the third quarter. We have begun conversations with our lenders and believe we are well positioned to address these maturities.

Liz Perkins: In April the company repaid in full one secured mortgage loans for a total of approximately $7 million, bringing the number of unencumbered hotels in the company's portfolio as of April 32025 to 207.

Liz Perkins: We have two mortgage loans totaling $56 million that will mature in the second and fourth quarter and term loans totaling $225 million that mature in the third quarter, we have begun conversations with our lenders and believe we are well positioned to address these maturities.

Liz Perkins: Turning to our updated outlook for 2025 provided in yesterday's press release, for the full year, we expect net income to be between $167 million and $195 million. Comparable hotels REVPAR changed to be between negative 1% and 1%. Comparable hotels adjusted hotel EBITDA margin to be between 33.7 and 34.7%. And adjusted EBITDA RE to be between $433 million and $457 million. As compared to the midpoint of previously provided 2025 guidance, we are decreasing Comparable Hotels REV PAR change by 200 basis points, resulting in a 50 basis points decrease in Comparable Hotels Adjusted Hotel EBITDA margin percentage and a decrease in Adjusted EBITDA RE of $14 million.

Liz Perkins: Turning to our updated outlook for 2025 provided in yesterday's press release for the full year, we expect net income to be between $167 million and $195 million comparable hotels revpar change to be between negative 1% and 1%.

Liz Perkins: Comparable hotels adjusted hotel EBITDA margin to be between $33, seven and 34, 7% and adjusted EBITDA to be between $433 million and $457 million.

Liz Perkins: As compared to the midpoint of our previously provided 2025 guidance, we are decreasing comparable hotels revpar change by 200 basis points, resulting in a 50 basis point decrease in comparable hotels adjusted hotel EBITDA margin percentage and a decrease in adjusted EBITDA, sorry, a $14 million.

Liz Perkins: As a reminder, while our asset management and hotel teams are working diligently to mitigate cost pressures, we have assumed for purposes of guidance that total hotel expenses will increase by approximately 3.3% at the midpoint, which is a 3.8% increase on a CPR basis. We continue to assume in guidance that these increases are driven by higher growth rates for certain fixed expenses, including real estate taxes and general liability insurance, than those experienced last year, and have included approximately $2 million of incremental expenses related to brand conferences, which occur every 18 to 24 months. This outlook is based on our current view and does not take into account any unanticipated developments in our business or changes in the operating environment, nor does it take into account any unannounced hotel acquisitions or dispositions.

Liz Perkins: As a reminder, while our asset management and hotel teams are working diligently to mitigate cost pressures, we have assumed for purposes of guidance. The total hotel expenses will increase by approximately three 3% at the midpoint, which is a three 8% increase on a CPR basis.

Liz Perkins: We continue to assume in guidance that these increases are driven by higher growth rates for certain fixed expenses, including real estate taxes, and general liability insurance than those experienced last year and have included approximately $2 million of incremental expenses related to brand conferences, which occur every 18 to 24 months.

Liz Perkins: This outlook is based on our current view and does not take into account any unanticipated developments in our business or changes in the operating environment, nor does it take into account any unannounced hotel acquisitions or dispositions.

Liz Perkins: The low end of the range reflects a slight pullback in lodging demand, while the high end of the full year range reflects a slight improvement in the macroeconomic environment.

Liz Perkins: The low end of the range reflects a slight pullback in lodging demand while the high end of the full year range reflects a slight improvement in the macroeconomic environment.

Liz Perkins: As we celebrate and reflect on our 25 years in the hospitality industry and 10 years since listing on the New York Stock Exchange, we are confident our team has the knowledge and experience to successfully navigate market shifts and changing conditions to maximize profitability and drive additional value through opportunistic transactions. The underlying merits of our differentiated strategy have proven resilient across economic cycles, enabling us to preserve equity value in challenging environments and be uniquely positioned to enhance value as opportunities arise. While there may be economic headwinds this year, we believe favorable supply-demand dynamics remain.

Liz Perkins: As we celebrate and reflect on our 25 years in the hospitality industry and 10 years since listing on the New York Stock Exchange. We are confident our team has the knowledge and experience to successfully navigate market shifts and changing conditions to maximize profitability and drive additional value through opportunistic transaction.

Liz Perkins: The underlying merits of our differentiated strategy have proven resilient across economic cycles, enabling us to preserve equity value in challenging environments, and we are uniquely positioned to enhance value as opportunities arise while there may be economic headwinds. This year, we believe favorable supply demand dynamics remain our <unk>.

Liz Perkins: Our recent capital allocation activity has enabled us to drive incremental value for shareholders, and our balance sheet continues to provide us with meaningful optionality. We are confident we remain well-positioned for outperformance.

Liz Perkins: Capital allocation activity has enabled us to drive incremental value for shareholders and our balance sheet continues to provide us with meaningful Optionality. We are confident we remain well positioned for outperformance.

Operator: That concludes our prepared remarks this morning, and we're happy to answer any questions you may have for us. Operator. Thank you.

Liz Perkins: That concludes our prepared remarks this morning, and we're happy to answer any questions you may have for us.

Liz Perkins: Operator.

Speaker Change: Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment it may be necessary.

Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question You may press star 2 if you would like to remove your question from. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start key. One moment, please, while we poll for questions.

Liz Perkins: To pick up your handset before pressing the star keys.

Speaker Change: One moment, please while we poll for questions.

Aryeh Klein: Our first question comes from Aryeh Klein with BMO Capital Markets. Please proceed with your question. Thanks and good morning.

Speaker Change: Our first question comes from Ari Klein with BMO capital markets. Please proceed with your question.

Ari Klein: Thanks, and good morning.

Justin Knight: Um, I was hoping maybe you can provide a little bit more color on the REF part guide. It seems to imply that things maybe are flattish or even a little bit better. The rest of the year, just talk about.

Ari Klein: I was hoping maybe you can provide a little bit more color on the Revpar guide it.

Ari Klein: It seems to imply that things, maybe are flattish or even a little bit better than the rest of the year you just talk about what you're seeing.

Ari Klein: From a demand standpoint, it looks like you had some visibility.

Ari Klein: Over the next couple of months, what that what that kind of looks like and any any changes it would be.

Ari Klein: If you're on a consumer side of things.

Justin Knight: https://www.youtube.com Happy, happy to talk through that. So, you know, I think when we look at booking position, which really is, you know, between that and Q1 driving the changes at the midpoint of guidance, you know, looking at our booking position in late February, you know, at the time, that that booking position supported the guidance then, and Q1 expectations came down from there about 100 and basis, 180 basis points, relative to you know, the expectations at that point. As we look at booking position today, you know, when we think about the midpoint of our range, it's a 200 basis point drop, and the implied REVPAR expectations for Q2 through Q4 are essentially flat in the back half when you consider, you know, the impact of Q2, which will be negatively impacted by April.

Happy happy to talk to that so you know I think when we look at booking position, which really is.

Ari Klein: Between that and Q1 driving the changes at the midpoint of guidance now looking at our booking position in late February you know at the time.

Ari Klein: That that booking position supported the guidance then in Q1 expectations came down from there about 100 basis 180 basis points relative to the.

Ari Klein: The expectations at that point.

Ari Klein: As we look at booking position today, you know when we think about the midpoint of our range. Its a 200 basis point drop and the implied revpar expectations for Q2 through Q4.

Ari Klein: Or essentially flat in the back half when you consider the impact of Q2, which will be negatively impacted by April so.

Justin Knight: So, you know, when we look at bookings with You know, with April, we now expect Q2 to be our worst quarter, with about 1% REBPAR growth implied for the back half of the year.

Ari Klein: When we look at bookings wet.

Ari Klein: You know with April we now expect Q2 to be our worst quarter with about 1% revpar growth implied for the back half of the year beyond bookings as we look at the last eight days or so we're seeing significantly stronger performance. It's certainly too soon to call that a trend, but it is encouraging.

Justin Knight: Beyond bookings, as we look at the last eight days or so, we're seeing significantly stronger performance. You know, it's certainly too soon to call that a trend, but it is encouraging. And, you know, I think in addition to that, you know, while taking into consideration our booking position today relative to what it was late February, you know, we believe we have additional opportunity to capitalize on some market share as well. So, you know, it's a combination of things that gives us, you know, gives us, you know, the confidence or sort of gives us the midpoint that we provided in the revised guidance.

Ari Klein: And you know I think in addition to that while taking into consideration our booking position today relative to what it was late February.

We believe we have additional opportunity to capitalize on some market share as well. So it's a combination of things that gives us.

Ari Klein: It gives us you know.

Ari Klein: The confidence our sort of gives us.

Ari Klein: The midpoint that we provided in the revised guidance, but I do feel like based on where we performed to expectations in Q1, and what we're seeing today. The 200 basis points represents what we have visibility visibility too.

Justin Knight: But I do feel like based on where we perform to expectations in Q1 and what we're seeing today, the 200 basis points represent, you know, what we have visibility to. Thanks for that.

Ari Klein: Thanks for that and then just the Navy maybe just on the transaction market you got some deals done.

Michael Bellisario: And then Justin, maybe maybe just on the transaction market, you got some deals done. Carter, which is good to see. But, you know, curious how, how. conversations look like. board.

Ari Klein: In the quarter, which is good to see but curious how how are conversations all conversations look like.

Ari Klein: Moving forward are there deals to be had in that market and how active do you expect to be.

Justin Knight: Are there deals to be had in this market and how active do you expect? I think the transaction market has remained largely unchanged. I think debt continues to be available. Uncertainty has kept a lot of people who might be interested in larger transactions on the sideline. Where we've been effective from a disposition standpoint has been around smaller assets where we're generally selling to local owner-operators at lower per key and lower all-in purchase prices. We continue to think that there will be opportunity to do that and to potentially redeploy proceeds into the purchase of our shares.

Ari Klein:

Ari Klein: I think that the transaction market has remained largely unchanged.

Ari Klein: I think that continues to be available on.

Ari Klein: Uncertainty has kept a lot of people who.

Ari Klein: Who might be interested in larger transactions on the sideline.

Ari Klein: Where we've been effective from a disposition standpoint has been around smaller assets.

Ari Klein: We're we're generally selling to local owner operators.

Ari Klein: But at lower per key in and lower all in purchase prices.

Ari Klein: We continue to think that there will be opportunity to do that.

Ari Klein: And to potentially redeploy proceeds into the purchase of our shares looking at what we intend to acquire now with.

Justin Knight: Looking at what we intend to acquire now with the Tampa Homewood Suites that we have under contract, that's a very unique transaction. I think as demonstrated by the spread from a cap rate standpoint between where we're buying that asset and where we've been selling assets recently, in that particular instance, we had an opportunity to buy an asset that is in the parking lot for a very successful hotel that we currently own where we have an opportunity to spread management between the two properties and create incremental synergies. Where the hotel had been taken back by a lender who was in control of the property and we were able to negotiate a strong going in yield, I think there will be less transactions like that available.

Ari Klein: With the Tampa Homewood suites that we have under contract that's a very unique transaction.

Ari Klein: I think as demonstrated by the spread from a cap rate standpoint between where we're buying that asset and where we've been selling assets recently.

Ari Klein:

Ari Klein: In that particular instance.

Ari Klein: Had an opportunity to buy an asset that is in the parking lot for a very successful hotel that we currently own.

Ari Klein: Where we have an opportunity to spread management between the two properties and create incremental synergies.

Ari Klein: The hotel it been taken back by a lender who is in control of the property and we were able to negotiate a strong going in yields I think there'll be less transactions like that available.

Michael Bellisario: Certainly, we're hopeful that we will continue to be able to execute on sale transactions as we have been year to date and really looking at our activity last year. In the current environment, we see tremendous value in our shares. We've been active buyers of shares. As I highlighted in my prepared remarks, to the extent we can continue to sell assets at a meaningful spread, we see that as a way to create tremendous value for our shareholders. Appreciate the color.

Ari Klein: And suddenly we're hopeful that we will continue to be able to execute on sale transactions as we have been.

Ari Klein: Year to date and really looking at our activity last year.

Ari Klein: In the current environment, we see tremendous value in our shares we've been active buyers of shares.

Ari Klein: As I highlighted in my prepared remarks and to the extent, we can continue to sell assets at a meaningful spread.

Ari Klein: We see that as a way to create tremendous value for our shareholders.

Ari Klein: Thanks, I appreciate the color.

Ari Klein: Absolutely.

Michael Bellisario: Our next question comes from Michael Bellisario with Baird. Please proceed with your question. Thanks. Good morning, everyone. Morning. But on the demand front, and maybe putting government aside here. Where are you seeing those macro uncertainties result in RevPAR to be lower? And is it really just related at this point to booking hesitancy? Or are you seeing transients or group cancellations occur. Good question.

Speaker Change: Our next question comes from Michael Bellisario with Baird. Please proceed with your question.

Michael Bellisario: Thanks, Good morning, everyone.

Speaker Change: Hi, good morning.

Speaker Change: On the demand front, and maybe putting government side here.

Speaker Change: Where are you seeing those macro uncertainties, resulting revpar to be lower and is it really just related at this point to booking hesitancy or are you seeing.

Speaker Change: <unk> or group cancellations occur.

Good question, you know I think we can spend a little time on segmentation broadly to help.

Justin Knight: You know, I think we can spend a little time on segmentation broadly to help, you know, frame a full picture. You know, a portion of it does relate to government and the pullback in government, though I think, you know, we are seeing strong group, small group business. Our team is really focused on group and property direct business and mixing shift away from government, which, you know, we had leaned more into than we had historically. If you remember going into March, we actually were over-indexed to government at 7% of our business mix. So, I think, you know, when we think overall, we're not seeing, you know, we're not seeing a pullback in group.

Speaker Change: Frame a full picture of PAH.

Speaker Change: Portion of it does relate to government and the pullback in government, though I think you know we are seeing strong group small group business. Our team is really focused on group and property direct business and mixing shift away from government, which we.

Speaker Change: We had leaned more into them than we had historically if you remember.

Speaker Change: Going into March we actually were over indexed to government at 7% of our business mix.

Speaker Change: So I think when we think overall we're.

Speaker Change: We're not seeing we're not seeing a pullback in group, while we did see some one time group cancellations with government specifically when you look at group as a whole both with current performance and looking outward we've got strong group position on the books.

Justin Knight: While we did see some, you know, one-time group cancellations with government specifically, when you look at group as a whole, both with current performance and looking outward, we've got strong group position on the books.

Justin Knight: You know, beyond that, I mentioned Q1 segmentation. I'm in my prepared remarks, but it might be helpful to focus on March and then prelim April. In March, government room nights had declined about 15% to 5% of our occupancy mix. Remembering that full year 2024, our room night mix for government is 5.5%, so 5% is still relatively good. The decline in room nights for March represented 80 basis points of occupancy mix decline. It's worth noting that going into March, our government bookings were above 7%, as I mentioned before, and negotiated, you know, as we think about other segments, negotiated was around 17% of our mix, which is healthy in March, down just 10 basis points.

Speaker Change: Beyond that I mentioned Q1 segmentation.

Speaker Change: I'm in my prepared remarks, but it might be helpful to.

Speaker Change: Focus on March and then Prelim April.

Speaker Change: In March government room nights had declined about 15% to 5% of our occupancy mixed remembering that full year 2024, our room night mix for government is five 5% so 5% still relatively good the decline in room nights for March represented 80 basis points of occupancy mix decline it's.

Speaker Change: Worth, noting that going into March our government bookings were above 7% as I mentioned before and negotiated you know as we think about other segments negotiated was around 17% of our mix, which is healthy and March down just 10 basis points. So again seeing some solid.

Justin Knight: So, again, seeing some solid, you know, solid performance from the negotiated segment. In a month that was negatively impacted by, you know, longer spring break season, you know, some macro uncertainty, all of those things, you know, negotiated held up relatively well.

Speaker Change: Solid performance from the negotiated segment in a month that was negatively impacted by.

Speaker Change: Longer spring break season.

Speaker Change: Some macro uncertainty all of those things you know negotiated held up relatively well.

Speaker Change: Sure.

Justin Knight: Shifting to April, which is certainly prelim, and I don't have the last few days of the month, but which would only improve it because we ended April much more solidly than we started it. You know, the month was noisy with Easter in the month, eclipse comparisons year over year again, and spring breaks pushing into early April, but government room nights had improved to be down less than they were in March, down around 11% for the month, and cancellations appeared to have leveled out. You know, government was still 5.3% of our occupancy mix, down only 50 basis points in April, and negotiated business was almost 18% of our mix.

Speaker Change: Shifting to April which is certainly prelim and I don't have the last few days of the month, but.

Speaker Change: Which would only improve it because we ended April much more so probably than we started it.

Speaker Change: Month was noisy with Easter and the mine eclipse comparisons year over year again, and spring breaks pushing into early April but government room nights had improved to be down less than they were in March down around 11% for the month and cancellations appear to have leveled out.

Speaker Change: Government was still five 3% of our occupancy mix down only 50 basis points in April and negotiated this was almost 18% of our Max So in general it's it's a little bit of everything, but everything is still fairly solid as well and we're able to filling some gaps with.

Justin Knight: So, you know, in general, it's a little bit of everything, but everything is still fairly solid as well, and we're able to fill in some gaps with group, as I mentioned, which is really strong as we look ahead.

Speaker Change: Grip as I mentioned, which is really strong as we look ahead.

Michael Bellisario: That's very helpful.

Speaker Change: Got it that's very helpful. And then just my follow up.

Justin Knight: And then just my follow-up.

Speaker Change: Maybe for Justin just on Capex can you remind us sort of your philosophy. There how much you want to spend where you want to spend it and then any thoughts around maybe deferring.

Justin Knight: Justin, just on CapEx, can you remind us sort of of your philosophy there, how much you want to spend, where you want to spend it, and then any thoughts around maybe deferring projects and saving a little extra cash, given the uncertainty that's out there? I know some of your peers have pulled back on CapEx, but maybe just more broadly remind us of your philosophy around CapEx spending and return expectations.

Speaker Change: Projects and saving a little extra cash given the uncertainty that's out there I know some of your peers have pulled back on capex, but maybe just more broadly remind us of your philosophy around capex spend again and return expectations.

Justin Knight: Thanks. So historically, we've spent between 5 and 6% of revenues fairly consistently on CapEx, you know, the $80 to $90 million is roughly in that range that we anticipate spending this year, and covers 20 full renovations, a portion of which are end-of-franchise, PIPs, and then all of the other CapEx needs for our hotels, which include equipment and parking lots. and exterior façade, roofs. When we look at that and we look at our exposure to tariffs, it's a fraction of the total amount that we intend to spend.

Speaker Change: So historically, we've spent between five and 6% of revenues fairly consistently on Capex.

Speaker Change: The 80 to 90 million is roughly in that range.

Speaker Change: We anticipate spending this year and covers 20 full renovations a portion of which are and a franchised pips and then all of the other capex needs for our hotels, which include equipment.

Speaker Change: Equipment in our parking lots and exterior facades roofs.

Speaker Change: When we look at that and we look at our exposure to tariffs.

Speaker Change: It's a fraction of the total amount that we intend to spend.

Justin Knight: And in today's environment, Liz has highlighted that there is a tremendous amount of noise. It's important to reemphasize the fact that we're continuing to run really strong occupancies with the potential to potentially grow rate. You know, I think relative to our we have a meaningfully stronger balance sheet and feel absent a massive pullback, which we do not currently anticipate in the broader macroeconomic environment. It's prudent for us to proceed and to perform the renovations as we currently intend. You know, we're certainly mindful of and watching tariffs and the potential impact on both the timing of delivery of goods and the overall cost and have an ability and flexibility to make adjustments to our total spend by pushing projects or pulling projects forward.

Speaker Change: And in today's environment. This is highlighted.

Speaker Change: There is a tremendous amount of noise.

Speaker Change: Important to to reemphasize. The fact that we're continuing to run really strong occupancies with the potential to potentially grow rate.

Speaker Change: Hum.

Speaker Change: I think relative to our peers, we have a meaningfully stronger balance sheet and feel absent a massive pullback, which we do not currently anticipate in the macro economic environment.

Speaker Change: Prudent for us to proceed and to to perform the renovations as we currently intend.

Speaker Change: We're certainly mindful of them watching tariffs.

Speaker Change: And the potential impact on both the timing of delivery of goods and the overall cost and having the ability and flexibility to make adjustments to our total spend by pushing projects or pulling projects forward.

Justin Knight: But, you know, as of today, where we sit, we feel very comfortable with our expected spend for this year. And I should highlight also that to the extent we're renovating and our peers are not, we see that as putting us in a competitive advantage where we own assets in the same market.

Speaker Change: As of today, where we said.

Speaker Change: We feel very comfortable with our experts are expected and for this year.

Speaker Change: Okay.

Speaker Change: Understood.

Speaker Change: I should highlight also that to the extent, we're renovating and our peers are not we see that is putting us in a competitive advantage, where we own assets in the same market.

Austin Wurschmidt: Our next question comes from Austin Wurschmidt with KeyBank Capital Markets. Please proceed with your question. Great, thanks. Good morning, everyone. First off, Liz, I just wanted to clarify a comment earlier about implied Red Park growth trends. Did you say you expect second quarter to be the worst quarter of the year and then the second half Red Park growth trends to be up 1%? Yes.

Speaker Change: Our next question comes from Austin, where Schmidt with Keybanc capital markets. Please proceed with your question.

Austin Schmidt: Great. Thanks, Good morning, everyone first off I, just wanted to clarify a comment earlier about implied revpar growth trends did you say you expect second quarter to be the worst quarter of the year and then the second half revpar growth trends to be up 1%.

Speaker Change: Yes.

Liz Perkins: All right, thank you. And then I guess when we think about the midpoint of the revised REBPAR growth guidance, is that more reflective of what we saw in March or more of what you're seeing in sort of this late April and into May, where things have stabilized a little bit? I'm not sure if that's more on the March trajectory or kind of a new normal somewhere between the start of the year and March. Just any commentary you can provide around that would be helpful. Well, I think that, you know, we certainly were You know, looking very closely at actuals as they've been coming in, demand trends looking forward, and have been pleased with the last week, but we're contemplating the revised guidance in advance of this week.

Speaker Change: Alright. Thank you and then I guess, when we think about the midpoint of the revised Revpar growth guidance is that more reflective of what we saw in March or more of what you're seeing in sort of this late April and into May where things have stabilized a little bit.

Speaker Change: Not sure if that's more on the March trajectory or kind of a new normal somewhere between you started the year in March just any commentary you can provide around that would be helpful.

Speaker Change: Well I think that we certainly work.

Speaker Change: Looking very closely at actuals as they've been coming and demand trends looking forward and have been pleased with the last week, but where we're contemplating.

Speaker Change: The revised guidance in advance of this week I'd say, we're encouraged by the last week trend, but it or I shouldn't say the last week, but it's too soon for us to call. It a trend unnecessarily work it into R.

Liz Perkins: I'd say we're encouraged by the last week trend, or I shouldn't say trend, the last week, but it's too soon for us to call it a trend and necessarily work it into our revised guidance range. I believe that it, you know, helps to reinforce that we believe performance year-to-date is not necessarily indicative of what we'll see later in the year because of all the noise, whether it be calendar shifts or, you know, some of the macro commentary, some of the, you know, policy uncertainty. You know, we believe underlying all of that there are still some positive trends, and again, our absolute occupancy and rate are strong.

Speaker Change: Our revised guidance range and I believe that it.

Speaker Change: <unk> helps to reinforce that we believe performance year to date is not necessarily indicative of what we'll see it later in the year because of all the noise whether it be calendar shifts. So are some of the macro commentary and some of the <unk>.

Speaker Change: Policy uncertainty.

Speaker Change: We believe underlying all of that there are still some positive trends and again, our absolute occupancy and rate are strong. So this last week is encouraging but I'd say you know quarter first quarter performance and just general demand trends and what we've seen in segmentation is what got us to the midpoint of the guidance range.

Liz Perkins: So, this last week is encouraging, but I'd say, you know, first quarter performance and just general demand trends and what we've seen in segmentation is what got us to the midpoint of the guidance range.

Austin Wurschmidt: got it. And then if I heard you correctly, I believe you said that, you know, some of the ADR in the first quarter offset some occupancy softness, I assume, particularly in March, but after you kind of remix your business, you know, from the weakness in certain Are you there? Austin, you broke out for a period of time, can you repeat that? Yeah, so I was just kind of referencing, you know, that you had said earlier that, you know, ADR offsets some occupancy software. of are experiencing some technical difficulties right now. Operator, can you still hear us?

Speaker Change: Got it and then if I heard you correctly I believe you said that some of the ADR in the first quarter offset some occupancy softness I assume particularly in March but after you kind of remix your business.

Speaker Change: From the weakness in certain.

Speaker Change: Are you there is guidance.

Speaker Change: Austin.

Speaker Change: You broke out for a period of time can you repeat that.

Speaker Change: Yeah. So I was just kind of referencing you know.

Speaker Change: You had said earlier that 80.

Speaker Change: Our offset some occupancy softness.

Speaker Change: Early in the year, but after remixing the business now.

Speaker Change: And some weakness in certain.

Speaker Change: The weakness in certain segments, how do we think about that ADR occupancy.

Speaker Change: We're experiencing some technical difficulties right now.

Speaker Change: Operator can you still hear us.

Justin Knight: Now you're coming in loud and clear. Let's try one more time. Is Austin still there? Can you guys hear me? I can hear you now. We'll see if we can get through. I think you're asking how to think about, well, it broke out at the exact same point, but I think I have the gist of your question, which is, as we think about ADR performance, year to date, and as we think about the mixed shift going forward, how should we be thinking about rates? Correct. Okay. You know, I would say that we are leveraging, you know, more property direct business.

Speaker Change: Now you're coming in loud and clear, let's try one more time.

Austin Schmidt: As Austin still there.

Austin Schmidt: Can you guys hear me.

I can hear you now.

Austin Schmidt: We'll see.

I think youre asking.

Austin Schmidt: About.

Austin Schmidt: Well it broke out at the exact same point, but I think I have the gist of your question, which is as we think about ADR performance year to date and as we think about the mix shift going forward, how should we be thinking about rate.

Austin Schmidt: Is that correct.

Austin Schmidt: Okay.

Austin Schmidt: I would.

Austin Schmidt: Say that we are we are leveraging more property direct business. We are working actively working to.

Justin Knight: We are working, actively working to continue to ensure that we have great based business. I'd say based on what we see today, it's coming on at great rates. It's good, healthy rates. And where we are from an occupancy perspective, that shouldn't be generally too surprising. So, I think we still anticipate that as we're able to grow occupancy, we should be able to gain rate. And we are encouraged that as some segments have pulled back, we have been able to maintain rate. So, you know, we don't have any significant change to how we view ADR, you know, optionality or ADR potential growth as we move forward.

Austin Schmidt: To continue to ensure that we have great base business I would say based on what we see today, it's coming on at <unk>.

Austin Schmidt: Rates, it's good healthy rates and where we are from an occupancy perspective that shouldn't be generally too surprising.

Austin Schmidt: So I think we still anticipate that as we're able to grow occupancy we should be able to gain right.

Austin Schmidt: And we are encouraged that adds some segments have pulled back we have been able to maintain rate. So.

Austin Schmidt: We don't have any significant change to how we view ADR up optionality or ADR potential growth as we move forward and even with the mix our mix shifts in our business.

Justin Knight: And, you know, even with some mixed shifts in our business.

Austin Wurschmidt: For more information, go to www.FEMA.gov That's helpful. Thank you.

Austin Schmidt: Okay. That's helpful. Thank you.

Austin Schmidt: Thank you.

Jay Kornreich: Our next question comes from Jay Kornreich with Wedbest Securities. Please proceed with your question. Hi, good morning. Thank you. You mentioned that group is overall looking strong, and I recognize it's a smaller overall segment of your portfolio, roughly 14% of demand.

Speaker Change: Our next question comes from Jay Kornreich with Wedbush Securities. Please proceed with your question.

Jay Kornreich: Hi, good morning, Thank you.

Jay Kornreich: You mentioned that group is overall looking strong and I recognize it's a smaller overall segment of your portfolio at roughly 14% of demand, but I'm. Just curious if you've seen any changes to booking trends there or any increased hesitancy from group counterparties to get contracts signed for travel later this year or into next year or is everything kind of remaining strong as referenced before.

Justin Knight: But I'm just curious if you've seen any changes to booking trends there or any increased hesitancy from group counterparties to get contracts signed for travel later this year or into next year? Or is everything kind of remaining strong, as you referenced before? Remaining strong for the type of group we have in our hotels. As a reminder, it is a smaller percentage of our overall mix, but it is a consistent, you know, consistent contributor to our mix. And it generally represents smaller corporate and, you know, smaller leisure groups that book nearer term. And so, you know, I think the fact that we are able to secure near-term group bookings is an indication that that segment is not hesitating.

Jay Kornreich: Sure.

Okay.

Jay Kornreich: Remaining strong for the type of group, we have in our hotels as a reminder, it is a smaller percentage of our overall mix, but it is a consistent.

Jay Kornreich: Consistent contributor to our mix and it generally represent smaller corporate and smaller leisure groups that book.

Jay Kornreich: Near term and so.

Jay Kornreich: I think the fact that we are able to secure a near term group bookings as an indication that that segment is not hesitating.

Justin Knight: And, you know, to the extent we're able to continue to see that as we progress through the year, you know, we'd be confident, you know, we'd be confident as we continue forward. No signs, at least at this point, other than some group cancellations in March, specific group cancellations in March around government, have we really seen any pushback on the group side. Okay, thanks for that.

Jay Kornreich: And to the extent, we're able to continue to see that as we progress through the year, we'd be confident.

Jay Kornreich: We'd be confident as we continue.

Jay Kornreich: Forward.

Jay Kornreich: No signs at least at this point other than some group cancellations in March specific group cancellations in March around government.

Speaker Change: Have we really seen any pushback on the group side.

Speaker Change: Okay. Thanks for that and then just one follow up I wanted to go back to being willing to opportunity opportunistically sell assets and redeploy the proceeds into additional share repurchases. If you decided to do that.

Justin Knight: And then just for one follow up, I wanted to go back to being willing to opportunistically sell assets and redeploy proceeds into additional share repurchases.

Justin Knight: If you decided to do that, how quickly do you think you could sell assets to do so? And at what total size do you perceive being able to or wanting We're continuously in market, and so exploring potential options. So I think, you know, it's possible that we could complete transactions in a, you know, reasonable number of transactions within a three to six month period. The challenge we'll have in terms of total scale will not be desire, but the lack of a portfolio bidder, meaning that in today's environment the most likely scenario will continue to be the sale of individual assets at lower total purchase prices.

Speaker Change: Quickly do you think you could sell assets to do so and what total size do you foresee being able to or wanting to.

Speaker Change: We're continuously in market.

Speaker Change: And so exploring potential options so I think.

Speaker Change: It's possible that we could complete transactions.

Speaker Change: A reasonable number of transactions within a three to six month period.

Speaker Change: The challenge we will have in terms of total scale will not be desire, but the lack of a portfolio of bidder, meaning that in today's environment. The most likely scenario will continue to be the sale of individual assets at lower total purchase prices.

Justin Knight: That's where we've seen the greatest traction with potential buyers, and as a result, the greatest opportunity to drive pricing that's attractive to us, which means, you know, in order to scale, we would need to do a large number of individual transactions, which we are up for and ready to perform. And I think, you know, I think given that backdrop, should we continue to trade at or around current levels and have the ability to continue to execute, there's not a real limit on our overall appetite to do transactions.

Speaker Change: That's where we've seen the greatest trends.

Speaker Change: The greatest traction with potential buyers and as a result, the greatest opportunity to drive pricing that's attractive to us.

Speaker Change: Which means.

In order to scale, we would need to do a large number of individual transactions, which we are up for it.

Speaker Change: And ready to perform.

Speaker Change: And I think.

Speaker Change: Given that backdrop.

Speaker Change: Should we continue to trade at.

Speaker Change: At or around current levels.

Speaker Change: And have the ability to continue to execute theres not not.

Speaker Change: A real limit.

Speaker Change: Our overall appetite too.

Speaker Change: To do transactions like that.

Jay Kornreich: Okay, appreciate the information. Thank you.

Speaker Change: Okay I appreciate the information thank you.

Floris Dijkum: Our next question comes from Floris Dijkum with Compass Point. Please proceed with your question. A following up on the on the capital allocation side, just maybe can you talk about how many assets do you have in the market today? Presumably this and this has has forced you to to, you know, look at your the bottom 10% of your portfolio in greater detail. Maybe talk a little bit about, you know, how many assets Currently, you're looking to sell and obviously, with the share price being where it is, repurchasing that which is not in your estimates would also boost your FFO per share, presumably going forward as well.

Speaker Change: Our next question comes from Floris Van <unk> with Compass point. Please proceed with your question.

Speaker Change: Hey.

Speaker Change: Following up on the on the capital allocation side.

Speaker Change: Just maybe can you talk about how many assets do you have in the market today, presumably this and this has has forced you to two.

Speaker Change: Look at your the bottom 10% of your portfolio in greater detail.

Speaker Change: Maybe talk a little bit about.

Speaker Change: How many assets.

Speaker Change: Currently youre looking to sell and obviously with the share price being where it is.

Speaker Change: Repurchasing that that which is not in your in your estimates would also boost your <unk> per share, presumably going forward as well.

Justin Knight: Absolutely.

Speaker Change: No absolutely.

Justin Knight: And to clarify, we're opportunistic sellers, so we're not limited to a certain type of assets within our portfolio. Certainly to the extent we're looking to trade in this way, we're looking to sell assets where we can optimize value relative to alternative use of capital. And we are intentionally selecting assets that we feel are marketable in today's environment. That said, we have not historically, nor do we intend to speak to total volume that we're exploring opportunities around today. But only to say that I think repeating what I said in response to the last question that I got, we have an appetite to pursue transactions that make sense.

Speaker Change: To clarify we're opportunistic sellers. So we're not limited to a certain type of assets within our portfolio.

Speaker Change: Certainly to the extent, we're looking to trade in this way we are looking to sell assets, where we can optimize value relative to alternative use of capital.

Speaker Change: And we are intentionally selecting assets that we feel are marketable in today's environment.

Speaker Change: That said, we have not historically, nor do we intend to speak to total volume.

Speaker Change: We're exploring opportunities around today.

Speaker Change: Only to say that.

Speaker Change: I think <unk>.

Speaker Change: Repeating what I said in response to the last question that I got.

Speaker Change: We are.

Speaker Change: We have an appetite to pursue transactions that make sense.

Justin Knight: And that's not limited. It's limited only by our ability to execute in a way that creates value for our share.

Speaker Change: That's not not limited.

Speaker Change: It's limited only by our ability to execute in a way that creates value for our shareholders.

Justin Knight: And maybe the follow up in terms of forward contracts, obviously, you have a big one in Nashville, your appetite to do those kinds of things in this environment, presumably, is, you know, it's almost nonexistent. Would that be correct? Our appetite continues to be strong for that type of transaction. Our ability to execute on it is limited. And, you know, I highlighted in my prepared remarks 60%, roughly 60% of our portfolio has no exposure to projects under construction within a five-mile radius. And it's important to let that sink in. That's unprecedented for our portfolio and certainly speaks to the fact that new construction starts, at least in our markets, with the types of hotels that we own, have pulled back dramatically.

Speaker Change: And maybe the follow up in terms of forward contracts, obviously, you have a big one in Nashville.

Speaker Change: Your appetite to do those kinds of things in this environment, presumably as you know.

Speaker Change: It's almost nonexistent would that be correct.

Speaker Change:

Speaker Change: Our appetite continues to be strong for that type of transaction our ability to execute on that is limited.

Speaker Change: I highlighted in my prepared remarks.

Speaker Change: 60% roughly 60% of our portfolio has no exposure to projects under construction within a five mile radius and it's important to let that sink in.

Speaker Change: Unprecedented for our portfolio and certainly speaks to the fact that new construction starts.

Speaker Change: At least in our markets with the types of hotels that we own have pulled back dramatically.

Justin Knight: And, you know, I think as I highlighted in my prepared remarks, added uncertainty around overall pricing because of the uncertainty around tariffs has further put new construction starts on hold. That's also impacting discussions that we're having with potential sellers of newly developed deals. And I think until there's greater clarity around where overall pricing is likely to land, we'll continue to see fewer construction, new construction sites, and our ability to make forward commitments for those will be limited as well.

Speaker Change: I think as I highlighted in my prepared remarks added uncertainty around overall pricing because of the uncertainty around tariffs.

Speaker Change: Has further put new construction starts on hold that's also impacting discussions that we're having with potential sellers of newly developed deals.

Speaker Change: And I think until there's greater clarity around where overall pricing is likely to land. We will continue to see fewer construction, new construction starts and our ability to make forward commitments for this will be limited as well.

Justin Knight: Thanks, Justin. Absolutely.

Speaker Change: Thanks, Justin.

Speaker Change: Absolutely.

Michael Herring: Our next question comes from Michael Herring with Green Street Advisors. Please proceed with your question. Hi, thank you. You guys have talked a little bit about the change in makeshift of demand as you guys go through the year. I was wondering if you could talk a little bit about how your operators are thinking about some cost mitigation at certain properties or various markets and if that's been prioritized as of yet. Um, I'd say we're always focused on, you know, cost savings and operating as efficiently as we can. You know, reiterating that our occupancy is still really strong, and the delta that we have seen in occupancy is not, while we want it to be better, it is not material in a way that we can, you know, meaningfully adjust, you know, the labor structure of our hotels or the cost structure overall.

Speaker Change: Our next question comes from Michael Herring with Green Street Advisors. Please proceed with your question.

Speaker Change: Alright, thank you.

Speaker Change: You guys have talked a little bit about the change in mix shift of demand as you guys go through the year I was wondering if you could talk a little bit about how your operators are thinking about some cost mitigation.

Speaker Change: Certain properties are very smart kitchen.

Speaker Change: Been prioritized.

Speaker Change: As of yet.

Speaker Change: Yeah.

Speaker Change: I'd say, we're always focused on cost savings and operating as efficiently as we can.

Speaker Change: Reiterating that our occupancy is still really strong and the delta that we have seen in occupancy is not while we want it to be better it is not material.

Speaker Change: In a way that we can meaningfully adjust.

Speaker Change: You know that the labor structure of our hotels or the cost structure. Overall, I think again I don't want to underestimate that the team has done an exceptional job and continues to focus on it but within the range of Occupancies that we have provided with the updated guidance range.

Justin Knight: I think, you know, again, I don't want to underestimate that the team has done an exceptional job and continues to focus on it, but within the range of occupancies that we have provided with the updated guidance range, you know, we're really focused on what, you know, what we have been focused on, which is focused, you know, working on productivity, reducing contract labor, which we've been extremely successful with, reducing turnover, strengthening, you know, the teams, and the longer that the teams that we have in-house with lower turnover, the longer that we have them, the better culture that we have, and, you know, the better productivity we yield.

Speaker Change: We're really focused on what we have been focused on with Jay.

Speaker Change: <unk> working on.

Speaker Change: Activity, reducing contract labor, which we've been extremely successful with reducing turnover strengthening the teams and the longer that the teams that we have in house with lower turnover.

Speaker Change: The longer that we have done the better culture that we have and the better productivity, we yield and so we're focused on many things all the time, but I wouldn't say we're in.

Justin Knight: And so, you know, we're focused on many things all the time, but I wouldn't say we're in, you know, deep cost mitigation territory yet. And again, you know, that's not contemplated within the guidance range. You know, to the extent, you know, things worsened, you know, we have proven over multiple cycles that for, you know, any top-line degradation, we lose less on the bottom line. So, I am confident that if we have to pivot, you know, we'll be able to do so competitively. All makes sense. Thank you.

Speaker Change: Deep deep caused our cost mitigation territory yet.

Speaker Change: And again, that's not contemplated within the guidance range to the extent.

Speaker Change: If things worsened, we have proven over multiple cycles.

Speaker Change: That for any topline degradation, we lose less on the bottom line. So I am confident that if we have to pivot.

Speaker Change: We will be able to do so competitively.

Speaker Change: All makes sense. Thank you.

Justin Knight: And I guess kind of thinking about that, that last point there, do you think that the hotel industry in general is better set up to, to do better in a recession type of scenario and as well as Apple's portfolio in particular? Or do you think that there's still some risk there? in case there is any broader drawback in demand. As I highlighted in my prepared remarks, we are convicted around the fact that the adjustment or the lack of new supply in the majority of our markets, we believe firmly that that meaningfully shifts the risk profile, limiting downside and meaningfully increasing upside potential for our assets.

Speaker Change: Yes kind of.

Speaker Change: Thinking about that last point, there or do you think that the hotel industry in general is better set up to.

Speaker Change: Do better in a recession type of scenario and as well as apples portfolio in particular or.

Speaker Change: Do you think that there's still some risk there.

Speaker Change: Hum.

Speaker Change: In case, there is any broader drawback in demand.

Speaker Change: As I highlighted in my.

Speaker Change: In my prepared remarks.

Speaker Change: We're convicted around the fact that the adjustment or the lack of new supply in the majority of our markets.

Speaker Change: Believe firmly that meaningfully shifts the risk profile limited downside and meaningfully increasing upside potential for our assets when you look at historical.

Justin Knight: When you look at historical critiques of our strategy, they have largely been around exposure to supply. And what we have found is that in today's environment, the types of markets where we own assets and the types of assets that we own are enjoying, you know, a level of protection that is unprecedented. And I think that will position them for meaningfully stronger performance on a go-forward basis. I think that's already manifest as we have weathered these small blips from a, you know, disrupted demand standpoint, you know, March specifically, in that the negative impact on our portfolio of that, plus year-over-year comps, plus challenging weather, was relatively minor.

Speaker Change: Right.

Speaker Change: <unk> of our strategy there.

Speaker Change: They have largely been around exposure to supply and what we have found is that in today's environment the types of markets.

Speaker Change: We own assets.

Speaker Change: And the types of assets that we own.

Speaker Change: Enjoying.

Speaker Change: A level of protection that is unprecedented.

Speaker Change: I think that will position them for a meaningfully stronger performance on a go forward basis I think that's already.

Speaker Change: Manifest.

Speaker Change: As we have whether it be small blips from AR.

Speaker Change:

Speaker Change: Disrupted demand standpoint.

Speaker Change: March specifically.

Speaker Change: And that the negative impact on our portfolio.

Speaker Change: Of that plus year over year comps plus challenging weather.

Speaker Change: Was relatively minor.

Justin Knight: And I think in a more dramatic pullback, we would be meaningfully better positioned than we have been in times past. And if you go back and look at historical cycles, and I've had the opportunity to live through a number of them, you know, the exacerbator for the negative impact on the hotel industry and on portfolios like ours, specifically, which, in spite of that, performed relatively incredibly well, you know, was driven by the fact that there was outside supply growth at the worst potential time or worst possible time in the economic cycle. And that's very unlikely to happen the way we're set up today.

Speaker Change: And I think in a more dramatic pullback would be meaningfully better positioned than we have been in times past and if you go back and look at historical cycles, and I've had the opportunity to live through a number of them.

Speaker Change: Okay.

Speaker Change: The exacerbate or for the negative impact on.

Speaker Change: The hotel industry and on portfolios like ours, specifically, which in spite of that performed relatively incredibly well.

Speaker Change: Was.

Speaker Change: Driven by the fact that there was outsized supply growth at the worst potential time.

Speaker Change: Worst possible time in the economic cycle.

Speaker Change: It's very unlikely to happen.

Speaker Change: The way, we're set up today and in fact.

Michael Herring: And, in fact, you know, to the extent we continue to see a pullback in new construction starts, you know, our expectation is that near-term, you know, well over half of our portfolio won't have any exposure to new supply for several years to come. Understood. Thank you.

Speaker Change: To the extent, we continue to see a pullback in new construction starts.

Our expectation is that near term.

Speaker Change: Well over half of our portfolio. It wont have any exposure to new supply for several years to come.

Speaker Change: Understood. Thank you.

Speaker Change: Thank you. Thank you.

Operator: As a reminder, if you would like to ask a question, please press star one on your telephone keypad.

Speaker Change: As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.

Jack Armstrong: Our next question comes from Jack Armstrong with Wells Fargo. Please proceed with your question. Hey, good morning. Thanks for taking the question. So according to date, we've seen some weaker REGPAR for hotels kind of at the upscale level, and down the chain scale. Would you say that across your portfolio, you're seeing more pressure on all of the middle income consumer, and maybe less of a trade down effect than we would have expected in a normal, normal macro slowdown environment? I can't say that I see that as we look at the data. I believe that what we have seen, at least for our portfolio year to date, has more to do with specific market concentration relative to the broader industry or peers or, again, just the number of disruptors that particularly influence, you know, our market locations.

Speaker Change: Our next question comes from Jack Armstrong with Wells Fargo. Please proceed with your question.

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

Jack Armstrong: Quarter to date, we've seen some weaker revpar for hotels.

Speaker Change: <unk> level and down the chain scale would you say that across your portfolio you are seeing more pressure on all of the middle income consumer and maybe less of a trade down effect than we would've expected at a normal normal macro slowdown environment.

Speaker Change: I can't say that I see that as we look at the data I believe that what we have seen at least for our portfolio year to date has more to do with specific.

Speaker Change: Vic market concentration relative to the broader industry, our peers or again, just the number of disruptors that particularly influenced.

Speaker Change: Our market locations I think between the weather the <unk>.

Justin Knight: You know, I think between the weather, the eclipse comp, the Easter shift, and the fact that Q1 is always our softest quarter because we are both a leisure but also heavy business transient portfolio, to the extent you're in a slower business transient season, you have an extended spring break season, and, you know, certainly the macro noise, I think broadly it's more that than chain scale driven. Okay, great.

Speaker Change: <unk> comp.

Speaker Change: Easter shift and the fact that Q1 is always our softest quarter.

Speaker Change: Because we are both leisure, but also heavy business transient portfolio to the extent you're in a slower business transient season do you have an extended spring break season.

Speaker Change: Certainly the macro noise I think I think broadly it's more of that than chain scale driven.

Speaker Change: Okay, Great and then just a quick follow up can you compare your level of full time employees to kind of pre pandemic and your composition of contract labor.

Justin Knight: And just a quick follow up. Can you compare your level of full-time employees to kind of pre-pandemic and your composition of contract labor? Do you have more flexibility or less flexibility now than you did kind of heading into the pandemic if we get into a scenario where you need to I'd say that our full-time FTEs are maybe maybe just shy of pre-pandemic levels when you look at it. I mean, you know, we have been able to benefit from some of the you know, some of the housekeeping modifications, but our average length of stay, is it such that that materially changes, you know, our full-time associate headcount materially?

Speaker Change: Do you have more flexibility or less flexibility now.

Speaker Change: Now than you did kind of heading into the pandemic, if we get to a scenario where you need to cook.

Oh.

Speaker Change: I'd say that our full time ftes are he maybe maybe just shy of pre pandemic levels. When you look at it I mean.

Speaker Change: We have been able to benefit from some of the.

Speaker Change: Some of the housekeeping modifications, but our average length of stay is it such that that materially changes our full time associate head count.

Speaker Change: Material.

Justin Knight: From a contract labor perspective, I mentioned in my prepared remarks, we're around 7% for the quarter. That's still slightly elevated to what we tracked pre-pandemic, but I will say that our tracking is better post-pandemic than it was pre-pandemic. So, we're probably still, you know, 200 basis points higher than what we were tracking in 2019. So, still some opportunity on the contract labor side, you know, as we move more to in-house. But generally speaking, I think our staffing level is stable and in line with what we would expect.

Speaker Change: Yeah.

Speaker Change: From a contract labor perspective, I mentioned in my prepared remarks were around 7% for the quarter, that's still slightly elevated to what we track.

Speaker Change: Pre pandemic, but I will say that our tracking is better post pandemic than it was pre pandemic. So we're probably still.

Speaker Change: 200 basis points higher than what we were tracking in 2019.

Speaker Change: So some opportunity on the contract labor side.

Speaker Change: As we move more to in house, but generally speaking I think our staffing level is.

Speaker Change: Is stable and in line with what we would expect from a flexibility standpoint going into some sort of other period of disruption I would say.

Justin Knight: From a flexibility standpoint, going into some sort of other, you know, period of disruption, I'd say, you know. We have always been in a position, given the types of assets that we own, that when there are, you know, pullbacks in demand, we can efficiently operate with fewer FTEs. You know, given the fact that we have been through a more significant demand shock than we ever would have anticipated with COVID, and we were able to quickly adapt, you know, I do feel confident that our teams, and in partnership with the brands, that we could make adjustments quickly, you know, as, you know, as the environment changed.

Speaker Change: <unk>.

We have always.

Speaker Change: <unk> been in a position given the types of assets that we own that.

Speaker Change: That when there are pullbacks in demand, we can efficiently operate with fewer ftes.

Speaker Change:

Speaker Change: Given the fact that we have been through a more significant demand shock.

Speaker Change: Than we ever would have anticipated with Covid and we were able to quickly adapt.

Speaker Change: You feel confident that our teams and in partnership with the brands that we could make adjustments quickly.

Speaker Change: As you know.

Speaker Change: As the environment changed so I do think on a relative basis, we're in a slightly better position, but generally the types of business that the types of assets that we invest in.

Justin Knight: So, I do think on a relative basis, we're in a slightly better position, but generally, the types of business, the types of assets that we invest in, it's strategic. It's because they're efficiently operated and can be more efficiently operated than other hotel types.

Speaker Change: It's strategic it's because they are efficiently operated and can be more efficiently operated than other hotel type.

Operator: Okay, great. Thank you.

Speaker Change: Okay, great. Thank you.

Thank you.

Justin Knight: There are no further questions at this time, so I would now like to turn the floor back over to Justin Knight for closing comments. Thank you. And we appreciate you joining us today. As always, we hope that as you travel, you'll take the opportunity to stay with us at one of our hotels. We look forward to seeing a number of you in the coming week.

Speaker Change: There are no further questions at this time I would now like to turn the floor back over to Justin Knight for closing comments.

Speaker Change: Thank you.

We appreciate you joining us today as always we hope that as you travel you will take the opportunity to stay with us or one of our hotels and we look forward to seeing a number of you in the coming weeks.

Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: Yes.