Q1 2025 Xenia Hotels & Resorts Inc Earnings Call
Okay.
Unknown Executive: Hello everyone and welcome to the Xenia Hotels & Resorts Inc Q1 2025 earnings conference call.
Carla: Hello, everyone and welcome to today's Xenia hotels, <unk> Resorts, Inc. Q1, 2025 earnings Conference call. My name is Carla and I will be coordinating with the call today.
Unknown Executive: My name is Carla and I will be coordinating your call today. If you would like to ask a question, please press star followed by one on your telephone keypad. If you change your mind, please press star followed by two.
Carla: If you would like to ask a question. Please press star followed by one on your telephone keypad. If you change your mind. Please press star followed by Chi I would now like to hand, you over to Aldo Martinez manager of finance to begin. Please go ahead when you're ready.
Unknown Executive: I would now like to hand you over to Aldo Martinez, Manager of Finance to begin. Please go ahead when you're ready.
Carla: Yeah.
Marcel Verbaas: Thank you, Carla, and welcome to Xenia Hotels & Resorts first quarter 2025 earnings call and webcast.
Speaker Change: Thank you Carla and welcome to the Xenia hotels, <unk> resorts first quarter 2025 earnings call and webcast.
Marcel Verbaas: I'm here with Marcel Verbaas, our Chair and Chief Executive Officer, Barry Bloom, our President and Chief Operating Officer, and Atish Shah, our Executive Vice President and Chief Financial Officer. Marcel will begin with a discussion on our performance and recent transactions. Barry will follow with more details on Operating Trends and Capital Expenditure Projects.
Speaker Change: I'm here with Marc Silver box, our chair and Chief Executive Officer, Barry Bloom, our President and Chief operating Officer, and a T shirt, our executive Vice President and Chief Financial Officer.
Speaker Change: Marcel will begin with a discussion on our performance and recent transactions.
Barry Bloom: Barry will follow with more details on operating trends and capital expenditure projects.
Marcel Verbaas: And Atish will conclude today's remarks on our balance sheet and outline. We will then open the call for Q&A.
Barry Bloom: And teach will conclude today's remarks on our balance sheet and outlook.
Barry Bloom: We will then open the call for Q&A.
Marcel Verbaas: Before we get started, let me remind everyone that certain statements made on this call are not historical facts and are considered forward-looking statements. These statements are subject to numerous risks and uncertainties as described in our annual report on Form 10-K and other SEC filings, which could cause our actual results to differ materially from those expressed in or implied by our comments. Forward-looking statements in the earnings release that we issued this morning, along with the comments on this call, are made only as of today, May 2, 2025, and we undertake no obligation to publicly update any of these forward-looking statements as actual events unfold.
Before we get started let me remind everyone that certain statements made on this call are not historical facts and are considered forward looking statements.
Barry Bloom: These statements are subject to numerous risks and uncertainties as described in our annual report on Form 10-K, and other SEC filings, which could cause our actual results to differ materially from those expressed in or implied by our comments.
Barry Bloom: Forward looking statements in the earnings release that we issued this morning, along with the comments on this call are made only as of today may <unk> 2025, and we undertake no obligation to publicly update any of these forward looking statements as actual events unfold.
Marcel Verbaas: You can find the reconciliation of non-GAAP financial measures to net income and definitions of certain items referred to in our remarks in our first quarter earnings release, which is available on the Investor Relations section of our website. The property level information we'll be speaking about today is on a same property basis for all 31 hotels, unless specified otherwise.
Barry Bloom: You can find the reconciliation of non-GAAP financial measures to net income and definitions of certain items referred to in our remarks in our first quarter earnings release, which is available on the Investor Relations section of our website.
Barry Bloom: The property level information will be speaking about today is on a same property basis for all 31 hotels unless specified otherwise.
Unknown Executive: An archive of this call will be available on our website for 90 days.
Barry Bloom: Archive of this call will be available on our website for 90 days.
Marcel Verbaas: I will now turn it over to Marcel to get started. Thanks all and good afternoon everyone. We are pleased with our first quarter results, which gave us a strong start to the year. For the first quarter of 2025, we reported a net income of $15.6 million, adjusted EBIT IRE of $72.9 million, and adjusted FFO per share of 51 cents. Graph bar grew by 6.3% as compared to the first quarter of 2024, which exceeded our expectations and led to nearly 12% growth in adjusted EBITDA RE and nearly 16% growth in adjusted FFO per share. First quarter same property REFR for our 31 hotel portfolio was $188.73, with occupancy increasing by 180 basis points and ADR increasing by 3.6% compared to the same period last year.
I'll now turn it over to Marcel to get started.
Marcel: Thanks, Oliver and good afternoon, everyone.
We are pleased with our first quarter results, which gave us a strong start to the year.
Marcel: For the first quarter of 2025, we reported net income of $15 $6 million adjusted EBITDA of $72 $9 million.
Marcel: <unk> per share of <unk> 51 cents.
Marcel: Revpar grew by six 3% as compared to the first quarter of 2024.
Marcel: Which exceeded our expectations and led to nearly 12% growth in adjusted EBITDA and nearly 16% growth in adjusted <unk> per share.
Marcel: First quarter same property Revpar for 31 hotel portfolio was $188.73 with occupancy increasing by 180 basis points and ADR, increasing by three 6% compared to the same period last year.
Marcel Verbaas: The initial ramp up at Grand Hyatt Scottsdale, after the substantial completion of its transformative renovation, was a significant driver of this strong performance. However, the portfolio also benefited from meaningful REFBAR growth in a number of our other markets, with one-third of our assets achieving double-digit percentage REFBAR growth. and several others achieving high single-digit percentage REF bar.
Marcel: The initial ramp up at Grand Hyatt Scottsdale after the substantial completion of its transformative renovation.
Marcel: A significant driver of this strong performance.
Marcel: However, the portfolio also benefited from meaningful revpar growth in a number of our other markets with one third of our assets achieving double digit percentage revpar growth and several waters, achieving high single digit percentage revpar growth.
Marcel Verbaas: There were several poops and ticks that impacted our portfolio during the quarter. On the positive side of the ledger, our hotels in the Washington, D.C. and New Orleans markets benefited from the presidential inauguration and the Super Bowl in January and February, respectively. Also, March results were aided by the shift in the timing of the Easter holiday, which fell on March 31st in 2024, causing softness in demand during the last week of the month.
Marcel: There were several puts and takes that impacted our portfolio during the quarter.
Marcel: On the positive side of the ledger, our hotels in the Washington D C and New Orleans markets benefited from the presidential inauguration and the Super Bowl in January and February respectively.
Marcel: Oh, So March results were aided by the shifts in the timing of the Easter holiday, which fell on March 31, 2024, causing softness in demand during the last week of the month last year.
Marcel Verbaas: Conversely, we also experienced a few headwinds during the first quarter. Most significantly, January results were negatively impacted by unusually strong winter storms in several of our Sunbelt locations, particularly in Texas. A common theme throughout the portfolio was the fact that strong group business and recovering demand from some of the largest corporate accounts drove Breitbart gains. This is a continuation of the trends we experienced in 2024 and consistent with our expectations as we started the year. We came into the year with very strong group revenue. And this was realized in the first quarter. On the same property basis, first quarter hotel EBITDA of $79.3 million was 10.5% above 2024 levels.
Marcel: Conversely, we also experienced a few headwinds during the first quarter most.
Marcel: Most significantly January results were negatively impacted by unusually strong winter storms in several of our sunbelt locations, particularly in Texas.
Marcel: A common theme throughout the portfolio. It was the fact that strong group business and recovering demand from some of the largest corporate accounts drove revpar gains.
Marcel: This is a continuation of the trends we experienced in 2024 and consistent with our expectations as we started the year.
Marcel: We came into the year with very strong group revenue pace and this was realized in the first quarter.
Marcel: On a same property basis first quarter Hotel EBITDA was $79 3 million was 10, 5% above 2024 levels.
Marcel Verbaas: and Hotel Ibadan Margin increased 42 bases. We continue to be pleased with our operators' efforts to control expenses, as the impact of wage growth and other inflationary pressures continue to impact operating margins.
Marcel: And hotel EBITDA margin increased to 42 basis points.
Marcel: We continue to be pleased with our operator's efforts to control expenses as the impact of wage growth and other inflationary pressures continue to impact operating margins.
Marcel Verbaas: On our last quarterly earnings call, we expressed our excitement about the substantial completion of the Grant Hyatt Scottsdale Transformative Renovation and Upbranding. including the significantly expanded and upgraded Arizona Ballroom that opened to groups in mid-January. Customer feedback on the relaunched resort continues to be outstanding, and group production has been strong. ref our group by approximately 60% during the first quarter compared to the same quarter last year. which was consistent with our expectations. Despite overall transient demand in the Phoenix Coptsdale market being a bit softer Group revenue on the books for the remainder of the year has continued to grow, with our group revenue pace for 2025 now exceeding group revenues actualized in 2019, our project underwriting base year.
Marcel: On our last quarterly earnings call, we expressed our excitement about the substantial completion of the Grand Hyatt Scottsdale transformative renovation and branding.
Marcel: Including the significantly expanded and upgraded Arizona ballroom that opens a groups in mid January.
Marcel: Customer feedback on the relaunch resource continues to be outstanding and.
Marcel: And group production has been strong.
Marcel: Revpar grew by approximately 60% during the first quarter compared to the same quarter last year.
Marcel: Which was consistent with our expectations.
Marcel: Despite overall transient demand in the Phoenix, Scottsdale market being a bit softer this year.
Marcel: Yeah.
Marcel: Group revenue on the books for the remainder of the year it continues to grow.
Marcel: With our group revenue pace for 2025, now exceeding group revenues actualized in 2019, our project underwriting base year.
Marcel Verbaas: As of the end of the first quarter, over 80% of our expected group room revenue for the balance of the year was definitely...
Marcel: As of the end of the first quarter over 80% of our expected group room revenue for the balance of the year was definitely.
Marcel Verbaas: We completed two transactions over the last two months that we believe reflect prudent capital allocation. In March, we took advantage of a unique opportunity to acquire the fee-simple interest in the land underlying our high aggriegency from the City of Santa Clara. Through this $25 million purchase, we have improved our optionality and flexibility for this hotel and eliminated risk due to a potentially significant ground rent escalation in the near term. The ground lease provides for both percentage rent tied to revenues that could increase substantially over time, as well as a fair market value rent adjustment in the relatively near future.
Marcel: We completed two transactions over the last two months that we believe reflects a prudent capital allocation.
Marcel: In March we took advantage of a unique opportunity to acquire a fee simple interest in the land underlying our high brinci from the city of Santa Clara.
Marcel: Through to $25 million purchase we have improved our optionality and flexibility for this hotel.
Marcel: And eliminated risk due to a potentially significant ground rent escalation in the near term.
Marcel: The ground lease provides for both percentage rent type of revenues that could increase substantially over time.
Marcel: As well as a firm fair market value rent adjustments in the relatively near future.
Marcel Verbaas: After this transaction, we now own Feesimple Interest in all but one of our hotels, and thus have very limited exposure to ground lease expiration or rent escalation.
Marcel: After this transaction, we now own fee simple interest in all but one of our hotels.
Marcel: Those have very limited exposure to ground lease exploration or rent escalation.
Marcel: Okay.
Marcel Verbaas: On the disposition side, in April we sold Fairmont Dallas for $111 million, avoiding a costly and disruptive near-term renovation, and further improving the quality of the portfolio. We strongly believe that existing cash flow levels were not sustainable without a significant renovation due to the deteriorating physical condition of this 56-year-old hotel, guest expectations for a luxury hotel, and the upcoming closing and renovation of the Dallas Convention Center that we expected to negatively impact this group-focused hotel in the near and medium term. We estimate that near-term capital expenditures of approximately $80 million would have been required to maintain and improve the hotel's competitive position.
Marcel: On the disposition side in April we sold Fairmont, Dallas were $111 million, avoiding a costly and disruptive near term renovation and further improving the quality of the portfolio.
Marcel: We strongly believe that existing cash flow levels were not sustainable without a significant renovation.
Marcel: The deteriorating physical condition of this 56 year old hotel guest.
Marcel: Yes, the expectation for a luxury hotel.
Marcel: Upcoming clothing and renovation of the Dallas Convention Center.
Marcel: We expect it to negatively impact this group focused hotel in the near and medium term.
Marcel: We estimate that near term capital expenditures of approximately $80 million would have been required to maintain and improve the hotels competitive positioning.
Marcel Verbaas: This extensive potential renovation would have been highly disruptive to the hotel's operations and EBITDA, and carried a significant amount of execution risk. With the amount of capital reinvestment that would have been required, the even-doubt disrupted during the renovation, and the expected time it would have taken to reach stabilization post-renovation.
Marcel: This extensive potential renovation would've been highly disruptive to the hotel's operations and EBITDA and carried a significant amount of execution risk.
Marcel: With the amount of capital Reinvestments that would've been required there.
Marcel: Even though disrupted during the renovation and do you expect the time it would have taken to reach stabilization post renovation.
Marcel Verbaas: We believe that the sales of the hotel was a superior capital allocation decision for the company. The Fairmont Dallas investment was a very successful one. We acquired the hotel for $69 million in 2011. The hotel generated strong cash flow during most of our period of ownership. which in combination with our net sale proceeds resulted in an unlevered IRR of 11.3% for his investment. is especially strong considering the impact of the pandemic on cash flow in 2020 and 2021.
Marcel: We believe that the sale of the hotel was a superior capital allocation decision for the company.
Marcel: The Fairmont Dallas investments was a very successful one.
Marcel: We acquired those over $69 million in 2011.
Marcel: The hotel generated strong cash flow during most of our period of ownership.
Marcel: Which in combination with our net sale proceeds resulted in an unlevered IRR of 11, 3% for his investment.
Marcel: This is especially strong considering the impact of the pandemic on cash flow in 2020 in 2021.
Marcel Verbaas: I would like to thank our team for their hard work in getting both transactions across the finish line in a challenging market environment. Despite the heightened macroeconomic uncertainty over the past two months and the resulting concerns about consumer spending, we have not yet seen a significant impact on our portfolio as a result. Based on preliminary results, we estimate that our 30 hotel same-property portfolio, which now excludes Fairmont Dallas, grew by approximately 3.4% in April as compared to last year. Despite the negative impact of the Easter timing shift on the results for the month.
Marcel: I would like to thank our team for their hard work in getting both transactions across the finish line in a challenging market environment.
Marcel: Despite the heightened macroeconomic uncertainty over the past two months and the resulting concerns about consumer spending we.
Marcel: We have not yet seen a significant impact on our portfolio of results.
Marcel: Based on preliminary results, we estimate that our 30 hotel same property portfolio, which now excludes Fairmont Dallas.
Marcel: Grew revpar by approximately three 4% in April as compared to last year.
Marcel: Despite the negative impact of the Easter timing shift on the results for the month.
Marcel Verbaas: Notwithstanding our positive year-to-date results, we have reflected the potential negative impact of this uncertain macroeconomic environment in our outlook for the remainder of the year.
Marcel: Notwithstanding our positive year to date results, we have reflected the potential negative impacts of this uncertain macroeconomic environment and our outlook for the remainder of the year.
Marcel Verbaas: Atish will discuss our adjustments to full year guidance, which incorporate both the impact of our recently completed transactions, as well as modestly greater downside risk to portfolio performance for the balance of the year. We have taken decisive action to reduce our capital expenditures this year in response to the headwinds created by the potential macroeconomic impact, including tariffs on goods sourced internationally. We are also reducing our G&A expenses and continue to work with our hotel operators to be even more disciplined in managing property level expenses. Regarding capital expenditures, we now expect to spend between $75 and $85 million on property improvements during the year.
Marcel: As usual I'll discuss our adjustments to support to full year guidance, which incorporates both the impact of our recently completed transactions as well as modestly greater downside risks to portfolio performance for the balance of the year.
Marcel: Yeah.
Marcel: We have taken decisive action to reduce our capital expenditures. This year in response to the headwinds created by the potential macroeconomic impacts including tariffs on goods sourced internationally.
Marcel: We are also reducing our G&A expenses and continue to work with our hotel operators to be even more disciplined in managing property level expenses.
Marcel: Yeah.
Marcel: Regarding capital expenditures we.
Marcel: Now expect to spend between 75 and $85 million on property improvements during the year.
Marcel Verbaas: a reduction of $25 million compared to our previous guide. This is partially the result of avoiding capital expenditures that were planned at Fairmont Dallas in 2020.
Marcel: A reduction of $25 million compared to our previous guidance.
Marcel: This was partially the result of avoiding capital expenditures that were planned at the Fairmont Dallas in 2025.
Marcel Verbaas: Additionally, we have elected to defer and modify some projects as we further refine and analyze scope, costs, and ROI expectations for these potential investments.
Marcel: Additionally, we have elected to defer and modify some projects as we further refine and analyze scope cost and ROI expectations for these potential investments.
Marcel Verbaas: Barry will provide additional details on the $32.4 million we invested during the first quarter and the latest on projects planned for 2025. Although our portfolio is not immune to the pressures created by potential slowdown in consumer spending and overall economic activity, we believe that we will benefit this year from the fact that all of our high quality branded hotels and resorts are in the luxury and upper upscale sector. and cater to customers that may be more resilient than those in the lower quality. We also believe that our geographic diversification and Sunbelt focus will once again benefit us as our exposure to inbound international demands and government business is limited.
Marcel: Barry will provide additional details on the $32 $4 million, we invested during the first quarter and the latest on projects planned for 2025.
Marcel: Although our portfolio is not immune to the pressures created by potential slowdown in consumer spending and overall economic activity.
Marcel: We believe we will benefit this year from the fact that all of our high quality branded hotels and resorts are in the luxury and upper upscale segments.
Marcel: Cater to customers that may be more resilient than those in the lower quality centers.
Marcel: We also believe that our geographic diversification and Sunbelt focus will once again benefit us as our exposure to inbound international demand and government business is limited.
Marcel Verbaas: We believe that we are well positioned to weather various economic environments with a curated portfolio, strong balance sheets, and experienced management. And we continue to expect that our high-quality brand and portfolio will show meaningful growth and appreciation in the years ahead.
Marcel: We believe we are well positioned to weather various economic environments with a curated portfolio strong balance sheets and experienced management team.
Marcel: And we continue to expect that our high quality brand in the portfolio will show meaningful growth and appreciation in the years ahead.
Marcel Verbaas: Reflecting this view, we increased our quarterly dividend by 17% and we repurchased 2.7% of our outstanding shares during the first quarter.
Marcel: Reflecting this view, we increased our quarterly dividend by 17% and we repurchased two 7% of our outstanding shares during the first quarter.
Barry Bloom: I will now turn the call over to Barry to provide more details on our operating results and our capital project. Thank you, Marcel, and good afternoon, everyone. For the first quarter, our 31 same-property portfolio REBPAR was $188.73. Based on occupancy of 69.3%, an average daily rate of $272.41, an increase of 6.3% as compared to the first quarter in 2024. Properties achieving double digit REVPAR growth as compared to the first quarter of 2024 included Grand Hyatt Scottsdale with REVPAR of 60.9%. Fitzcarlton-Pentagon City of 22.6%, Renaissance Atlanta-Waverly of 21.4%. Kempton Canary Hotel Santa Barbara up 20.4%, Lowe's New Orleans up 18%, Fitzcarlton Denver up 17.2%, Kempton Hotel Palomar Philadelphia up 15%, W Nashville up 14%, and Parkhead Aviaro Resort and Waldorf Astoria Atlanta Buckhead each up over 12%.
Marcel: I will now turn the call over to Barry to provide more details on our operating results and our capital projects.
Barry Bloom: Thank you Marcel and good afternoon, everyone.
Barry Bloom: For the first quarter, our 31 same property portfolio Revpar was $188 73.
Barry Bloom: Based on occupancy of 69, 3% and an average daily rate of $272 41.
Barry Bloom: The increased six 3% as compared to the first quarter in 2024.
Barry Bloom: Properties, achieving double digit revpar growth as compared to the first quarter of 2024 included Grand Hyatt Scottsdale with Revpar up 69%.
Speaker Change: It's called some Pentagon city of 22, 6% Renaissance Atlanta, Waverly up 21, 4% Kimpton Canary Hotel, Santa Barbara up 24% Loews, New Orleans up 18%.
Speaker Change: Call. It in Denver of 17, 2% Kimpton Hotel, Palomar, Philadelphia up 15% W. Nashville up, 14% and park Hyatt <unk> resort and Waldorf Astoria, Atlanta, Buckhead each up over 12%.
Barry Bloom: wrote that these properties represent a mixture of special events, as in the case of Ritz-Carlton-Pentagon City and Lowe's New Orleans. and generally stronger group and corporate demand across the portfolio as the recovery continues. Strong, high, single-digit red-card growth was experienced at the Fairmont-Pittsburgh, Marriott-San Francisco Airport, and Grand Bohemian Charleston.
Speaker Change: Both of these properties represents a mixture of special events as in the case of Ritz Carlton Pentagon City, and Loews New Orleans.
Speaker Change: And generally stronger group and corporate demand across the portfolio as the recovery continues.
Speaker Change: Strong high single digit Revpar growth was experienced at the Fairmont Pittsburgh.
Speaker Change: Transco Airport in Grand Bohemian Charleston.
Barry Bloom: The Houston market was softer than Q1 of 2024 as a result of several winter storms which impacted travel to the region. Looking at each month of the quarter, January REPFAR was $158.39, up 2.1% to January 2024, with occupancy down 20 basis points and ADR up 2.4%. February REVPAR was $202.60, up 12.6% compared to February 2024, with occupancy at 4.9 points and ADR up 5%. And March rev bar was $206.52, a 4.5% compared to March 2024, with occupancy up one point and ADR up 3.2%. Group business was a standout during the quarter, with both February and March group rooms revenue up over 15 percent, reflecting ongoing strength in group business that is expected to continue throughout the year.
Speaker Change: The Houston market was softer than Q1 of 2024 as a result of several winter storms, which impacted travel to the region.
Speaker Change: Looking at each month of the quarter January Revpar was $115 39.
Speaker Change: Of two 1% to January 2024, with occupancy down 20 basis points and ADR up two 4%.
Speaker Change: February Revpar was $202 60 up.
Speaker Change: Of 12, 6% compared to February 2024, with occupancy up four nine points and ADR up 5%.
Speaker Change: In March Revpar was $206 52, a four.
Speaker Change: Four 5% compared to March 2024, with occupancy up one point and ADR of three 2%.
Speaker Change: Group business was a standout during the quarter with both February and March group rooms revenue up over 15%, reflecting ongoing strength in group business. It is expected to continue throughout the year.
Barry Bloom: Overall for the quarter, group room nights were up 6.6% with ADR up 4.1%. Business from the largest corporate accounts across our portfolio grew significantly during the quarter, up approximately 15% compared to the first quarter of 2024, but still remained significantly behind in 2019. Business levels grew significantly for each night of the week during the quarter compared to the first quarter of 2024. Occupancies grew by 2.1 points on weekdays and 1 point on weekends, but the ADR grew up to 3.5% on weekdays and 3.4% on weekends. Leisure business during the quarter continued to vary at the large resorts across the portfolio, with significant increases in leisure business at Park Hyde Aviara and, of course, Grand Hyde Scotts.
Speaker Change: Overall for the quarter group room nights were up six 6% with ADR up four 1%.
Speaker Change: Business from our largest corporate accounts across our portfolio grew significantly during the quarter up approximately 15% compared to the first quarter of 2024, but still remains significantly behind 2019 levels.
Speaker Change: Business levels grew significantly for each night of the week during the quarter compared to the first quarter of 2024 Occupancies grew by two one points on weekdays and one point on weekends with ADR growth of three 5% on weekdays and three 4% on weekend.
Speaker Change: These are business during the quarter continued to various large resorts across the portfolio with significant increases in leisure business at park Hyatt <unk> and of course greenhouse Scottsdale, while leisure business at Hyatt Regency Grand Cypress was a bit softer, but was offset by a significant increase in group business.
Barry Bloom: While leisure business at High Regency Grand Cypress was a bit softer, it was offset by a significant increase in group... At our smaller leisure-focused hotels, leisure business grew with Kimpton Canary Santa Barbara, Hyatt Centric Key West, and Bohemian Savannah, while Grand Bohemian Charleston, Royal Palms, Onda's Napa, and Onda's Savannah experienced occupancy declines compared to the first quarter of last year.
Speaker Change: And our smaller leisure focused hotels leisure business grew with Kimpton, Canary, Santa Barbara Hyatt centric key west and Bohemian Savannah.
Speaker Change: While Grand Bohemian Charleston, Royal Palms, Andaz, Napa, and Andaz Savannah experienced occupancy declines compared to the first quarter of last year.
Barry Bloom: At Grand Hyde Scottsdale, the completion of guest-facing areas, including the expansion of the Arizona Barroom in mid-January, marked the successful completion of this project. From a guest satisfaction perspective, the hotel has been incredibly well-received, with TripAdvisor metrics significantly outscoring the hotel's competitive set and some of the highest internal guest satisfaction scores in the resorts. Our performance was in line with our expectations as the hotel worked to fill anticipated gaps in group business with transient business in a softer Scottsdale luxury market. Across the property, food and beverage revenue for the quarter was nearly equal to 2019, reflecting an excellent start during the ramp-up of the new ballroom.
Speaker Change: The Grand Hyatt Scottsdale, the completion of guest facing areas, including expansion of the Arizona borrowing in mid January marked the successful completion of this project.
Speaker Change: From a guest satisfaction perspective, the hotel has been incredibly well received the tripadvisor metrics significantly outscoring the hotels competitive set and some of the highest internal guest satisfaction scores in the resort's history.
Speaker Change: <unk> performance was in line with our expectations as the hotel worked to fill anticipated gaps in group business with transient business in a softer scottsdale luxury market.
Speaker Change: Across the property food and beverage revenue for the quarter was nearly equal to 2019, reflecting excellent start given the ramp up of the new ballroom.
Barry Bloom: Bankruptcy and Catering Contribution was terrific, with revenue per group room night up over 60% compared to 2019, reflecting the quality of group business and additional meeting time. the new L'Azzezona restaurant, the reimagined Grand Vista Bar, and the significantly expanded pool food and beverage offerings all performed exceptionally well versus our expectations.
Banquets and catering contribution was terrific with revenue per.
Speaker Change: Per group room night up over 60% compared to 2019, reflecting the quality of group business and additional meeting space.
Speaker Change: The new losses, Zona restaurant re imagine Grand Vista bar, and significant expanded pool food and beverage offerings, all performed exceptionally well versus our expectations.
Barry Bloom: Now, turning to expenses and profits. First quarter same property hotel EBITDA was $79.3 million, an increase of 10.5 percent, driven by a total revenue increase of 8.9 percent compared to the first quarter of 2024, resulting in 42 basis points of margin improvement. We continue to be pleased with the improvement in our operators' ability to manage expenses in what continues to be a challenging operating environment as occupancy improves. With a 31% property portfolio, food and beverage revenues increased 13.4% in the quarter, as a result of approximately 14% growth in both outlets and banks. Other operating department income including parking, spa and golf revenues grew by 14% as well.
Speaker Change: Now turning to expenses and profit first quarter same property hotel EBITDA was $79 3 million an increase of 10, 5% driven by a total revenue increase of eight 9% compared to the first quarter of 2024.
Speaker Change: Dosing and 42 basis points of margin improvement.
Speaker Change: We continue to be pleased with the improvement in our operator's ability to manage expenses well continues to be a challenging operating environment as occupancy improves.
Speaker Change: 31, same property portfolio food and beverage revenues increased 13, 4% in the quarter as a result of approximately 14% growth in both outlets and banquets.
Speaker Change: Other operating department income, including parking Spa and golf revenues grew by 14% as well.
Barry Bloom: Rooms expenses were well-controlled, increasing 2.5% on a per-occupied room basis, while F&B profit margin improved by 145 basis points. A&G and sales and marketing expenses each grew approximately 7% during the quarter as a result of the higher business levels and higher loyalty. Property operations and maintenance expenses grew by 5.8% due primarily to higher labor costs, while energy expenses across the portfolio grew at just 1.6% due to success from our significant infrastructure investments and despite significant winter storms in the Sunbelt.
Rooms expenses were well controlled increases to increasing two 5% on a per occupied room basis, while F&B profit margin improved by 145 basis points.
Speaker Change: AMG and sales and marketing expenses each grew approximately 7% during the quarter as a result of the higher business levels and higher loyalty program costs.
Speaker Change: Property operations and maintenance expenses grew by five 8% due primarily to higher labor costs, while energy expenses across the portfolio grew which is one 6% due to success from our significant infrastructure investments and despite significant winter storms in the sunbelt.
Barry Bloom: Finally, turning to CapEx, during the first quarter, we invested $32.4 million in portfolio improvements, which included CapEx related to the substantial completion of the transformative renovation and upbranding of the Grand Hyatt Scottsdale. During the first quarter, we completed the expansion of the Arizona Ballroom and the renovation of certain premium suites and casitas at Grand Ives Gap. Certain exterior projects, including a parking lot renovation, are expected to be completed by the end of this summer.
Speaker Change: Finally, turning to Capex during the first quarter, we invested $32 $4 million and portfolio improvements, which included capex related to the substantial completion of the transformative renovation and upgrading of the height of the Grand Hyatt Scottsdale.
Speaker Change: During the first quarter, we completed the expansion of the Arizona ballroom and the renovation of certain premium suites in casinos greenhouse Scottsdale.
Speaker Change: Exterior projects, including a parking lot renovation are expected to be completed by the end of this summer.
Barry Bloom: We're continuing with the process of reevaluating all the capital projects initially planned for 2025 in light of tariffs, which may have a significant impact on the cost of goods purchased from sources outside of the United States. As Marcel mentioned earlier, we've already taken decisive action on some previously planned projects, which include deferring the guest room renovations at Andaz Napa and Ritz-Carlton Denver, for a plan to begin in the fourth quarter of 2025. We plan to continue with select upgrades to guest rooms and public areas at a number of properties, including Fairmont-Pittsburgh, Renaissance-Atlanta-Waverly, Marriott-San Francisco Airport, Marriott-Dallas Downtown, Hyatt Center Key West, High Regency Santa Clara, Grand Bohemian Mountain Brook, Grand Bohemian-Charleston, and Kempton River Club.
Speaker Change: We are continuing with the process of reevaluating all of the capital projects. Initially planned for 2025 light of tariffs, which may have a significant impact on cost of goods purchased from sources outside of the United States.
Speaker Change: As Marcel mentioned earlier, we've already taken decisive action on some previously planned projects, which include deferring the guestroom renovations at Andaz, Napa and Ritz Carlton Denver were planned to begin in the fourth quarter of 2025.
Speaker Change: We plan to continue with select upgrades, the guest rooms, and public areas, a number of properties, including from our Pittsburgh Renaissance Atlanta Waverly Merit.
Speaker Change: AMSCO Airport Marriott Dallas downtown Hyatt centric key west have UC, Santa Clara Grand Bohemian Mountain Brook, Grand Bohemian Charleston, and Kimpton River place.
Barry Bloom: These projects will be performed based on hotel seasonality and are expected to result in minimal disruption. In addition, we expect to perform infrastructure and facade upgrades at approximately eight hotels throughout the remainder of this year.
Speaker Change: These projects will be performed based on hotel seasonality I expect it to result in minimal disruption.
Speaker Change: In addition, we expected from infrastructure and facade upgrades at approximately eight hotels throughout the remainder of this year.
Barry Bloom: As a result of the sale of Fairmont Dallas, we've reduced our budget for infrastructure projects for this year.
Speaker Change: As a result of the sale of Fairmont, Dallas, we've reduced our budget for infrastructure projects for this year.
Atish Shah: With that, I will turn the call over to Atish. Thanks, Barry. I'll provide an update on two topics.
ashish: With that I will turn the call over to Ashish.
ashish: Thanks, Barry I will provide an update on two topics.
Atish Shah: Our Balance Sheet in 2025 Guidance. First, our balance sheet continues to be strong. We have an appealing mix of debt and a good maturity profile. As to our interest rate exposure, our debt is about three-quarters, six, and one-quarter floating rate, which is an appropriate balance based on our portfolio and strategy, as well as the potential for lower interest rates . We have no significant debt maturities until late 2028, with only one property-level mortgage maturing in each of 2026 and 2027. Together, these two mortgage loans represent about 10% of our overall debt. At quarter end and pro forma for the sale of Fairmont Dallas, our leverage ratio was 5.4 times trailing 12 months net debt to EBITDA.
ashish: Our balance sheet in 2025 guidance.
ashish: Our balance sheet continues to be strong we have an appealing mix of debt and a good maturity profile as to our interest rate exposure. Our debt is about three quarters fixed and one quarter floating rate, which is an appropriate balance based on our portfolio and strategy as well as the potential for lower interest rates in the future.
ashish: We have no significant debt maturities until late 2028 with only one property level mortgage maturing in each of 2026 and 27.
ashish: Together these two mortgage loans represent about 10% of our overall debt.
ashish: At quarter end and pro forma for the sale of Fairmont Dallas, our leverage ratio was five four times trailing 12 months net debt to EBITDA.
Atish Shah: As a reminder, our long term leverage target is a net debt to EBITDA ratio in the low three to low four times. As to current liquidity, it is roughly $715 million, reflecting both a $500 million undrawn line of credit, as well as proceeds received from the sale of Fairmont Dallas last quarter. During the quarter, we repurchased about $36 million of stock at an average price of $13.09. This activity retired a meaningful 2.7% of our outstanding shares as of year-end 2020. We continue to evaluate share buybacks relative to other uses of capital, considering the implied cap rate, the implied per key value, our invested capital in our portfolio, our NAV, and our overall outlook on the business.
As a reminder, our long term leverage target is a net debt to EBITDA ratio in the low three to low four times range.
ashish: As to current liquidity. It is roughly 750 $15 million, reflecting both a $500 million Undrawn line of credit as well as proceeds received from the sale of Fairmont Dallas last month.
ashish: During the quarter, we repurchased about $36 million of stock at an average price of $13 nine.
ashish: This activity retired a meaningful two 7% of our outstanding shares as of yearend 2024.
ashish: We continue to evaluate share buybacks relative to other uses of capital considering the implied cap rate the implied per key value our invested capital in our portfolio, our NAV and our overall outlook on the business.
Atish Shah: During the quarter, we upped our quarterly dividend by approximately 17% to $0.14 per share. Our yield is nearly 5% on an annualized basis, assuming this level of dividend is maintained.
ashish: During the quarter, we upped our quarterly dividend by approximately 17% to <unk> 14 per share our yield is nearly 5%.
ashish: On an annualized basis, assuming this level of dividend is maintained.
Atish Shah: Turning next to our current 2025 guidance that we issued this morning, we have lowered our expectations for full year REVFAR growth by approximately 50 basis points at the midpoint.
ashish: Turning next to our current 2025 guidance that we issued this morning, we have lowered our expectations for full year revpar growth by approximately 50 basis points at the midpoint.
Atish Shah: While the top end of our guidance range is unchanged, the bottom end was lowered by 100 base This wider range reflects an increased level of macroeconomic uncertainty since we first provided guidance for 2025. Our midpoint of 4.5% REVPAR growth is driven by Grand Heights Scottsdale, which reflects two-thirds of our expected growth, or 3% out of 4.5%. This 300 basis point boost is consistent with what we've indicated a couple of months ago.
ashish: While the top end of our guidance range is unchanged. The bottom end was lowered by 100 basis points.
ashish: This wider range reflects an increased level of macroeconomic uncertainty since we first provided guidance for 2025.
ashish: Our midpoint of four 5% Revpar growth is driven by Grand Hyatt Scottsdale, which reflects two thirds of our expected growth or 3% out of four 5%.
ashish: This 300 basis point boost is consistent with what we had indicated a couple of months ago.
Atish Shah: Our forecasted full year rep part growth for the rest of the portfolio is moderated from up 2% to up one and a half percent of Based on performance through April, our implied REVPAR growth guidance for the balance of the year is approximately 1 to 7 percent, or approximately 3.75 percent at the midpoint. Again, this reflects the wide range of outcomes possible, given policy and other impacts to economic growth. We continue to believe that Red Park growth will be driven more by occupancy than rate this year. In addition, we expect strong non-rooms revenue growth, which is, in fact, what we saw in the first.
ashish: Our forecasted full year revpar growth for the rest of the portfolio has moderated from up 2% to up one 5% at the midpoint.
ashish: Based on performance through April are implied revpar growth guidance for the balance of the year is approximately 127%.
ashish: Or approximately 375% at the midpoint again this reflects a wide range of outcomes possible given policy and other impacts to economic growth.
ashish: We continue to believe that Revpar growth will be driven more by occupancy than rate. This year. In addition, we expect strong non rooms revenue growth, which is in fact, what we saw in the first quarter.
Atish Shah: At the midpoint, 50 basis points and lower REVPAR translates to approximately $3 million of lower expected EBITDA. This change is partially offset by $1 million in lower expected cash G&A expense for the full year to net $2 million in lower full-year EBITDA. To complete the walk, the transactions we completed in March and April further reduce EBITDA by a net $4 million. Therefore, the cut to prior adjusted EBITDA RE guidance is approximately $6 million.
ashish: At the midpoint 50 basis points and lower Revpar translates to approximately $3 million of lower expected EBITDA.
ashish: This change is partially offset by $1 million and lower expected cash G&A expense for the full year to net $2 million and lower full year EBITDA.
ashish: To complete the work the transactions, we completed in March and April further reduced the EBITDA by a net $4 million. Therefore, the cut to prior adjusted EBITDA guidance is approximately $6 million at the midpoint.
Atish Shah: As to adjusted EBITDA RE weighting by quarter, the weighting in the first quarter was nearly 30% of the full year, the second quarter is expected to be just under 30%, the third quarter is expected to be just under 20%, and the fourth quarter is expected to be approximately 25%. Turning now to our margin outlook, we currently expect hotel EBITDA margin to increase 50 basis points for the balance of the year. This compares to our prior expectations of flat margin for the full year. The main driver of our improved margin outlook is better expense management as we and our operators focus on the parts of the business that we can control.
ashish: As to adjusted EBITDA, Ari waiting by quarter the <unk>.
ashish: <unk> in the first quarter was nearly 30% of the full year. The second quarter is expected to be just under 30%. The third quarter is expected to be just under 20% in the fourth quarter is expected to be approximately 25%.
ashish: Turning now to our margin outlook. We currently expect hotel EBITDA margin increased 50 basis points for the balance of the year.
ashish: This compares to our prior expectations of flat margin for the full year.
ashish: The main driver of our improved margin outlook is better expense management as we and our operators focus on the parts of the business that we can control.
Atish Shah: Secondarily, and to a much lesser degree, the sale of Fairmont Dallas also helps our balance of the year margin output.
ashish: Secondarily and to a much lesser degree the sale of Fairmont Dallas also helps our balance of the year margin outlook.
Atish Shah: Turning ahead to group room revenue pace for our 30 hotels. Our group page continues to be healthy and a bright spot. As of the end of the first quarter, group pace for the balance of the year is up approximately 22%, excluding Scottsdale, it is up 13%. Again, for the balance of the year. Narrowing further, if we look at just the second half, group pace is up 30%, and excluding Scottsdale, it is up 20%. Group production is also tracking well. First quarter group room revenue production, and again, these numbers exclude Scottsdale, for the balance of the year is up 15% from the first quarter of last year.
ashish: Turning ahead to group room revenue pace for our 30 hotels.
ashish: Our group pace continues to be healthy and a bright spot.
ashish: As of the end of the first quarter group pace for the balance of the year is up approximately 22% excluding.
ashish: Excluding Scottsdale it is up 13%.
ashish: Again for the balance of the year now.
ashish: Narrowing further if we look at just the second half group pace is up 30%.
ashish: Excluding Scottsdale is up 20%.
ashish: Group production is also tracking well first quarter group room revenue production and again these numbers exclude Scottsdale for the balance of the year is up 15% from the first quarter of last year.
Atish Shah: This gain comes despite less availability remaining this year versus last year given our already higher group pace going into this We have not seen any pickup and cancellations or any outsized group attrition to date.
ashish: This gain comes despite less availability remaining this year versus last year, given our already higher group pace going into this year.
ashish: We have not seen any pickup in cancellations or any outsize group attrition to date.
Atish Shah: As to the other components of our outlook, we expect slightly higher interest expense and slightly lower income tax expense, which offset each other. Finally, our adjusted FFO per diluted share forecast is down about 1% at the midpoint or 2 cents. This change is driven by the impact of transactions and lower revenue expectations offset by recent share repurchase activity. We expect adjusted FFO per diluted share of $1.62 or slightly ahead of last year. We continue to believe in the strong merits of our top quality portfolio that is diversified across the best brands, desirable locations, and multiple demand drivers.
ashish: As to the other components of our outlook, we expect slightly higher interest expense and slightly lower income tax expense, which offset each other.
ashish: Finally, our adjusted <unk> per diluted share forecast is down about 1% at the midpoint or <unk>.
ashish: This change is driven by the impact of transactions and lower revenue expectations offset by recent share repurchase activity.
ashish: We expect adjusted <unk> per diluted share of $1 62.
ashish: We're slightly ahead of last year.
ashish: We continue to believe in the strong merits of our top quality portfolio that is diversified across the best brands desirable locations and multiple demand drivers.
Atish Shah: We view our balance sheet strength as an advantage. Given our size and orientation, we expect to be opportunistic in the years ahead in order to create long term shareholder value. And we look forward to many years of growth ahead as the supply-demand balance shifts to better benefit owners of high-end lodging.
ashish: We view our balance sheet strength as an advantage.
ashish: Given our size and orientation, we expect to be opportunistic in the years ahead in order to create long term shareholder value.
ashish: And we look forward to many years of growth ahead, as the supply demand balance shifts to better benefit owners of high end lodging real estate.
Unknown Executive: With that, we will turn the call back over to Carla to begin our question and answer session. Thank you. We will now begin the question and answer session.
Carla: With that we will turn the call back over to Carla.
Carla: To begin our question and answer session.
Speaker Change: Thank you.
Speaker Change: We'll now begin the question and answer session, if you'd like to ask a question. Please press star followed by one on your telephone keypad. If for any reason, we would like to remove yourself from the queue. Please press star followed by.
Unknown Executive: If you'd like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove yourself from the queue, please press star followed by two. When preparing to ask your question, please ensure that your device is unmuted locally.
Speaker Change: Thank you Francois for your question. Please ensure that your device is on mute locally.
Joshua Friedland: And our first question comes from Austin Wurschmidt with KeyBank Capital.
Speaker Change: And our first question comes from Austin Bush, that's the key.
Speaker Change: Bank capital.
Joshua Friedland: Hey, it's Josh Friedland on for Austin. Just wondering, have group booking trends evolved in response to the current uncertainty? Have you seen any increase in cancellations or are groups in more of a wait and see mode right now?
Josh: Hey, it's Josh <unk> on for Austin.
Speaker Change: Wondering have group booking trends evolved.
Speaker Change: In response to the current uncertainty.
Speaker Change: Have you seen any increase in cancellations or our groups in more of a wait and see mode right now.
Marcel Verbaas: Thanks, Josh. So, in terms of group booking activity, as I mentioned, you know, production in the first quarter was quite healthy and positive relative to the first quarter of last year. And that's for the balance of this year compared to the balance of 2024. So we feel good about kind of the production and the latest numbers we have on production. And I would say, as I mentioned earlier, no uptick in cancellations or attrition, really nothing to reflect, you know, any slowdown on the group side. But we're obviously watching that very, very closely and we'll continue to do so.
Speaker Change: Thanks, Josh So in terms of group booking activity as I mentioned production in the first quarter was quite healthy and positive relative to the first quarter of last year and that's for.
Speaker Change: The balance of this year compared to the balance of 2024. So we feel good about kind of the production and the latest numbers, we have on production and I would say as I mentioned earlier no.
Speaker Change: Uptick in cancellations or attrition really nothing.
Speaker Change: To reflect any slowdown on the group side, but we're obviously watching that very very closely.
Speaker Change: And we'll continue to do so in the weeks ahead.
Joshua Friedland: Okay, that's helpful.
Speaker Change: Okay. That's helpful and have you seen any meaningful impact from lower international inbound travel thus far.
Joshua Friedland: And have you seen any meaningful impact from lower international inbound travel thus far?
Marcel Verbaas: And which of your markets are most exposed to international inbound? Yeah, it's been, again, there, it's been relatively limited. You know, our portfolio, given the locations where we have our properties, we're not very dependent on international visitation. Now, clearly, markets like Orlando and Phoenix, to some extent, especially at the beginning of the year, when a lot of Canadian visitors generally go to those markets, you know, we have seen a little bit of softening on the leisure side, for sure. And, you know, we've talked before in prior quarters about Orlando a little bit. And we also think it's more of a phenomenon as far as, you know, the Epic Universe Park opening up soon, that people were probably kind of delaying some leisure trips down here.
Speaker Change: And which of your markets are most exposed to international inbound.
Speaker Change: Oh, Yeah, it's Ben again, there it's been relatively limited our portfolio given the locations that where we have our properties.
Speaker Change: Not very.
Speaker Change: Dependent on international visitation, now clearly markets like like Orlando.
Speaker Change: And Phoenix to some extent, especially at the beginning of the year when a lot of Canadian visitors generally go through those markets.
Speaker Change: I've seen it a little bit of softening on the leisure side for sure.
Speaker Change: We've talked before in prior quarters about Orlando a little bit.
Speaker Change: We also think it's more of a phenomenon as far as.
Speaker Change: The epic Universe Park opening up soon that people were probably kind of delaying some leisure trips down here.
Marcel Verbaas: You know, our assets, very particularly, both the ones that we have in Orlando and in Phoenix, actually don't do a lot of international business. But obviously, if the market is a little bit softer, you'll, you know, you'll see some of that ripple effect. But overall, you know, like I said, a very small percentage of our business that comes from international visitation, so we haven't seen any kind of meaningful impact.
Speaker Change: Our assets very particularly both the ones that we have in Orlando and in Phoenix.
Speaker Change: Actually don't do a lot of international business, but obviously, if the market is a little bit softer Yo Yo Yo.
Speaker Change: Youll see some of that ripple effects, but overall.
Speaker Change: Like I said, a very small percentage of our business that comes from international visitation. So we haven't seen any kind of meaningful impact there.
Joshua Friedland: All right, thanks for the time.
Speaker Change: Alright, thanks for the time.
Michael Bellisario: And the next question comes from Michael Bellisario with Bears. Thanks.
Speaker Change: The next question comes from Michael Bellisario.
Speaker Change: Thanks.
Speaker Change: Thanks, Good afternoon, everyone.
Michael Bellisario: Good afternoon, everyone, Santa Clara, maybe. Can you give us some background on the process, I mean, who approached whom, and I guess sort of pick a picture, just why now? And then you mentioned optionality. I assume that means either renovate or sell, or maybe there's a third option there too. Maybe just help us think about how you're evaluating that decision now and what would push you one way or the other.
Speaker Change: Santa Clara.
Speaker Change: Could you give us some background on the process and who approach to them and I guess sort of bigger picture just why now and then you mentioned optionality I assume that means either renovated or sell.
Speaker Change: Or maybe there's a third option there to maybe just help us think about how you're evaluating that decision now and what would push you one way or the other.
Marcel Verbaas: Sure. Like I mentioned, we essentially bought it from the city of Santa Clara. So it's a situation where we kind of had a unique opportunity to buy it because the city had decided to market the parcel essentially. So given some of the things I talked about as far as both future rent escalations and then obviously fair market value adjustments that was going to happen, this ground lease was potentially going to be much more expensive for us in the future. So this is the type of process that, as you can imagine, you're dealing with a municipal entity.
Speaker Change: Sure.
Speaker Change: Like I've mentioned, we essentially bought us from the city of Santa Clara. So, it's a situation, where we kind of had a unique opportunity to buy it because the city has decided to market the bar so essentially.
Speaker Change: So given some of the things I talked about as far as the.
Speaker Change: Both future rent Escalations and then obviously.
Speaker Change: A fair market value adjustments of what's going to happen.
Speaker Change: This this ground lease was potentially going to be much more expensive expensive for us in the future. So.
Speaker Change: This is the type of process that as you can imagine you're dealing with.
Speaker Change: Municipal entity is not something that happens in one night.
Marcel Verbaas: It's not something that happens in one night.
Marcel Verbaas: It's actually something that took a long time to kind of come to fruition and to finally close as we did in March. So as it relates to kind of the valuation, clearly it's not just a matter of kind of that. It's really looking at eliminating that risk on the rent escalation and eliminating the potential expiration risk. So You know, longer term, the reason why we say, you know, it creates, you know, additional optionality, the reality is just that an asset is much more valuable as a fee simple asset than if it was a ground, an asset that's subject to a ground lease, that could have some major escalations in a grant.
Speaker Change: It's something that took a long time to kind of come to fruition and to finally close as.
Speaker Change: As we did in March so you know as it is.
Speaker Change: It relates to kind of the valuation clearly.
Speaker Change: It's not just a matter of kind of looking at what the current going in cap rate of that is it's really looking at eliminating that risk on the rent escalation and eliminating the potential exploration risks so.
Speaker Change: Longer term the reason why we say it's Gary.
Speaker Change: Additional optionality. The reality is just that an asset is much more valuable as a field fee simple asset than it was a ground now sort of subject to a ground lease that could have some major escalations in our grants. So it just creates more long term optionality for us.
Marcel Verbaas: So it just creates more long term optionality for us.
Marcel Verbaas: I wouldn't say that, you know, don't read into that, that there's anything short term that we're necessarily doing there. We're doing some, you know, some relatively minor upgrades to the rooms that Barry was talking about. But in the short term, there's really nothing there to think about. It's more about kind of that long term optionality and just increasing the value of the asset. Thanks, Mike.
Speaker Change: I wouldn't say that don't read into that that there is anything short term does not necessarily doing there we're doing some.
Speaker Change: Some relatively minor upgrades stood rooms.
Speaker Change: Barry was talking about but in the short term, there's really nothing there to think about.
Speaker Change: It's more about kind of that long term optionality in and just increasing the value of the asset.
Speaker Change: Got it understood and then just for Barry on Capex, maybe just on the projects that you are.
Speaker Change: <unk> are pushing out I guess is the plan to reevaluate that later this year and do those next year and then how do you think about weighing sort of the impact.
Speaker Change: Returns and relative Revpar index in those properties by deciding not to spend the capex or the relative positioning within their respective markets any context, there would be helpful. Thanks.
Marcel Verbaas: Great question. It's going to be a continual evaluation process for us. As you know, we have our own in-house project management team, and so we feel like we have very good information based on whatever's going on at the current moment. And I think right now, when we were kind of in a position to launch those projects to execute this year, we were in a position where it was very uncertain, not only which products, but at what tariff levels we might need to pay.
Speaker Change: Thanks, Mike Great question.
Speaker Change: It's going to be continue to evaluate continual evaluation process for us.
Speaker Change: We have our own in House project management team.
Speaker Change: So we feel like we have very good information based on whatever is going on at the current moment and I think right now when we were kind of in a position to launch those projects to execute this year, we were in a position where.
Speaker Change: It's very uncertain.
Speaker Change: Not only which products, but at what tariff levels, we might be one might need to pay.
Marcel Verbaas: So we're going to take a step back, continue to evaluate those. Obviously, that was in part based on analysis of the condition of those assets and whether we could defer, for some period of time, a renovation there. So I think we certainly took that into account, but I think we felt like there was a lot of risk in moving ahead with those products right now, with tariff levels at a level that we thought would make the projects. perhaps uneconomic, and to make a one time decision for something that we don't know will be necessarily a permanent part of the decision making process.
Speaker Change: So we're going to take a step back continue to evaluate those obviously that was in part based on analysis of the condition of those assets and how.
Speaker Change: And whether we could differ.
Speaker Change: Some period of time, a renovation there. So I think we certainly took that into account, but I think we felt like there was a lot of risk in moving ahead with those projects right now with tariff levels at a level that we thought would make the projects for.
Speaker Change: Uneconomic and to make a one time decision for something that we don't know we'll be necessarily a permanent part of the decision making process. So I think we're very prudent in that and I think as I said, we we are evaluating it literally every couple of weeks, we're taking a look at where we are and what it might make sense to move forward those projects keeping in mind that.
Marcel Verbaas: So we're very prudent that and I think, as I said, we, we are evaluating it, literally every couple of weeks, we're taking a look at where we are and what it might make sense to move forward with those projects, keeping in mind that each of those assets has some unique seasonality, and they're, and they're relatively tight windows in which we would want to do a renovation of the full guest Understood.
Speaker Change: Each of those assets has some unique seasonality in there and theyre relatively tight windows in which we would want to do a renovation of of the full Castro.
Speaker Change: Understood. Thank you.
Michael Bellisario: Thank you.
Unknown Executive: Just as a reminder that if you'd like to ask a question, please press star followed by one on your telephone keypad.
Speaker Change: Just as a reminder, if you'd like to ask a question. Please press star followed by one on your telephone keypad.
Aryeh Klein: The next question comes from Aryeh Klein with BMO Capital Markets. Thanks and good afternoon.
The next question comes from Ali <unk>.
Speaker Change: <unk> with BMO capital markets.
Speaker Change: Thanks, and good afternoon.
Aryeh Klein: Can you maybe give a little bit of color on what you're seeing more recently from a leisure standpoint and any behavioral changes that you're seeing and then what's implied for the leisure segment within the full year guide? Thanks. You know, it's interesting, and I think in my commentary, I named some properties doing well and some properties that maybe aren't doing so well in terms of recapturing leisure. So it really varies a lot by market and varies a lot by competitive positioning, kind of lineage market. So we're not seeing a significant across portfolio trend in leisure, either in the more leisure oriented properties, which are generally those smaller, those smaller assets that have done historically drive to business.
Speaker Change: Can you maybe give a little bit of color on what youre seeing.
Speaker Change: From a leisure standpoint, and any behavioral changes that that youre seeing and then what's implied for the leisure segment with within the full year guide. Thank you.
Speaker Change: It's interesting.
Speaker Change: In my commentary I named some property is doing well and some properties that maybe arent doing so well in terms of recapturing leisure. So it really varies a lot by market. It varies a lot by competitive positioning kind of within each market. So we're not seeing a significant cross portfolio trend in leisure either in the more leisure oriented properties.
Speaker Change: Generally the smaller with smaller assets that have done historically attractive business, nor are we seeing particular patterns in the larger hotels, where.
Marcel Verbaas: Nor are we seeing particular patterns in the larger hotels where that are maybe more commercial during the week, but do more leisure business on the weekends. It's been very hard to discern any trend, and it's really been on a property by property, a market by market basis, in some cases driven by economics, in some cases driven by local market factors, in some cases driven by property specific.
Speaker Change: Or maybe more commercial during the week, but do more leisure business on the weekends. It's it's been very hard to discern any trend and it's really been on a property by property market by market basis in some cases, driven by economics in some cases driven by local market factors in some cases driven by property specific factors.
Marcel Verbaas: And I just add on to the second part of your question as to guidance and what we've thought about leisure. for the balance of the year is slight decline, low single digit, and a percentage decline in REVPAR at our leisure assets overall. Now, as you recall, we talked about 3.75% for the balance of the year, and I would say group would be the highest contributor to that REVPAR growth, followed by business. flagging. So that's that's kind of how we shake out based on demand driver.
Speaker Change: And I'd just add on to.
Speaker Change: To the second part of your question, which is.
Speaker Change: As to guidance.
Speaker Change: We've thought about leisure sort of for the balance of the year.
Speaker Change: Slight decline low single digit kind of percentage decline in revpar at our leisure assets overall.
Speaker Change: No as you recall, we talked about 375% for the balance of the year and I would say group would be the highest contributor to that revpar growth followed by business transient leisure kind of.
Speaker Change: Lagging so.
Speaker Change: That's kind of how.
Speaker Change: We shake out based on demand driver.
Marcel Verbaas: Thanks. And then maybe on group, obviously 2025 is an incredibly strong year for you. Anything you can share on 2026 and what that's beginning to look like? And then maybe more specifically in Scottsdale, you know, how are group bookings shaping up there for future years?
Speaker Change: Okay. Thanks, and then maybe on growth, obviously 2025 as an incredibly strong year for you anything you can share on <unk> and what that's beginning to look like that and that may be more ethylene Scottsdale.
Speaker Change: Yes, Howard was talking that shape is shaping up there for two years.
Marcel Verbaas: I think really too early to probably talk about 2026. As you know, we don't do, on a relative basis, a huge amount of convention center driven business. So it's about, you know, the shorter term corporate and shorter term association business is really the core of our portfolio. What I can tell you is that we, I think we've, given the success we've had in booking 2025, the sales teams are very focused on 2026. And not that they aren't always focused on all future dates. But because 2025 is so relatively booked across the portfolio, we're seeing a lot of focus and attention and a lot of opportunities earlier for 2026 than we otherwise have seen in prior years in terms of filling the books.
Speaker Change: Yes, I think really too early to probably talking about 2026 as you know we don't do.
Speaker Change: On a relative basis, a huge amount of convention center driven business. So it's about.
Speaker Change: The shorter term corporate and short term association business is really the core of our portfolio. What I can tell you is that we I think we've given the success. We've had in booking 2025. The sales teams are very focused on 26 and not that there arent always focus on all future dates, but because 2025, so relatively booked across the portfolio, we're seeing a lot of.
Speaker Change: Focus and attention and a lot of of opportunities earlier.
Speaker Change: Earlier for 2006, and we otherwise have seen in prior years in terms of filling during the books for 2000.
Speaker Change: Okay.
Marcel Verbaas: And then on Scottsdale, you know, the production there continues to be quite strong. I mean, group rate is up significantly. Relative to where it was in 2019, you know, our production level in the first quarter relative to what we produced Significant From a rate and volume perspective, I mean, Marcel talked about know our overall business being on the group side being Thank you.
Speaker Change: And then on Scottsville unit production there continues to be quite strong I mean group rate is up significantly.
Speaker Change: Relative to where it was in 2019.
Speaker Change: Our production level in the first quarter relative to what we produced in 2019 up significantly from a rate and volume perspective, I mean Marcel talks about.
Speaker Change: No our overall business being on the group side being.
Speaker Change: Over 75% to 80% definite so I think we feel really good about group and kind of are and how it fits with the overall thesis around delivering in the.
Speaker Change: EBITDA in the low $20 million range for this year at that asset.
Speaker Change: Thank you.
Speaker Change: Yeah.
Speaker Change: Yeah.
Jack Armstrong: Our next question comes from Jack Armstrong with Wells Fargo. Hey, good afternoon. Thanks for taking the question. What are you seeing in terms of mixed shifts in your group business? A lot of your peers have pointed to government business falling off pretty sharply in March before kind of getting to a stabilized level in April, and then a broader shift towards association business throughout the portfolio. Are you seeing similar trends in your portfolio? Or things play out differently for you guys?
Speaker Change: Our next question comes from Jack Armstrong with Wells Fargo.
Jack Armstrong: Hey, good afternoon, thanks for taking the questions.
Speaker Change: What are you seeing in terms of mix shift in your group business.
Speaker Change: Your peers have pointed to the government business falling off pretty sharply in March before kind of getting to a stabilized level in April and then a broader shift towards association business throughout the portfolio are you seeing similar trends in your portfolio or things played out differently.
Marcel Verbaas: Yeah, our portfolio from a group perspective is built a little bit differently than than some of the peers. In general, we have relatively lower, relatively less citywide business, relatively less government business. And most of our business is concentrated in corporate group, number first, and then association second. So we're, I think we're at which some of why we continue why we may not have seen what some of the peers have seen in terms of Booked business in the 25 or businesses book still booking the 25. Moderating. We continue to see strong lead volume and building funnels in the corporate and association business for 25.
Speaker Change: Yeah, our portfolio from a group perspective is built a little bit differently than some of the peers in general we have relatively lower we'll obviously less citywide business.
Speaker Change: I'll give you less government business and.
Speaker Change: So most of our business is concentrated in <unk>.
Speaker Change: Corporate group number first and then association second so we're I think we're.
Speaker Change: Some of why we continue while we may not have seen what some of the peers have seen in terms of of.
Speaker Change: Booked business into 'twenty fiber businesses as book, you're still looking at 25.
Speaker Change: Moderating we continued to see strong lead volume and building funnels in the.
Speaker Change: Corporate and association business for 25.
Marcel Verbaas: The one piece that we are seeing in corporate, the funnel is still very large. There's been a little bit slower transaction time as it's taken the corporate groups that the hotels are pursuing a little bit longer to approve and get through their systems in terms of approval and actual contract signing. Okay, great. That's really helpful.
Speaker Change: The one piece that that we are we are seeing in corporate the funnel is still very large there has been a little bit slower transaction time as it's taken our corporate groups with their hotels or pursuing a little bit longer to approve and get through their systems in terms of approval actual contract signing.
Speaker Change: Okay, Great. That's really helpful. And then just jumping back to the capital project I know you talked about seasonality at the hotel and the decision to defer or what would it be fair to assume that these projects, we're going to get done in 2006, we ended up in a more normal macro environment at the end of the year.
Marcel Verbaas: And then just jumping back to the capital project, I know you talked about seasonality at these hotels and the decision to defer. Would it be fair to assume that these projects are going to get done in 26 if we end up in a more normal macro environment by the end of the year and the relative disruption would be a little bit higher in 26? Yeah, you know, at this point, obviously, it is, it's relatively likely that we will, you know, we'll punt by about a year and then do them kind of towards the end of next year.
Speaker Change: Relative disruption would be a little bit higher in 'twenty six.
Speaker Change: Yeah, you know at this point obviously it is.
Speaker Change: Relatively likelihood we will pump by about a year and then do them kind of towards the end of next year, but it is going to really be dependent on the things we talked about as far as really potentially adjusting some of the scopes in these projects.
Marcel Verbaas: But it is going to really be dependent on the things we talked about as far as really potentially adjusting some of the scopes in these projects. Clearly, hopefully, there'll be some more certainty over the next few months as far as where tariffs ultimately will settle out. And that might drive some decisions as far as where you're sourcing some materials, and what the impact on the cost would be and how you kind of, you know, reevaluate again, the scope and what you do exactly, to still make it make sense from an ROI perspective. So in order, another aspect of that is obviously that there is a lot of uncertainty on the macroeconomic side.
Speaker Change: Clearly hopefully there'll be some more certainty over the next few months as far as where tariffs ultimately will settle out and that might drive some decisions as far as where youre sourcing materials and what the impact on the cost would be and how you're kind of.
Speaker Change: We reevaluate it again, the scope and what you do exactly to still make it makes sense from an ROI perspective so.
Speaker Change: In order in order aspect of that is obviously that there is a lot of uncertainty on the macroeconomic side. So it really depends on kind of what happens a little bit deeper into the year or two as far as what we're seeing.
Marcel Verbaas: So it really depends on kind of what happens a little bit deeper into the year two, as far as what we're seeing, kind of, you know, throughout the portfolio and in those markets specifically. And we'll continue to kind of evaluate the ROI on those projects to make sure that we still believe that next year might be the right time to actually do those projects. Yeah, the only thing I'd add is, you know, as with regard to disruption, your question for that for next year, I mean, those projects that we've decided to postpone, we're not going to be highly disruptive this year.
Speaker Change: Throughout the portfolio and in those markets specifically.
Speaker Change: And we'll continue to kind of evaluate the ROI on those projects to make sure that we still believe that next year it might be the right time to actually do those projects, yes. The only thing I would add is with regard.
Speaker Change: To disruption your question for for that for next year I mean, those those projects that we've decided to postpone we're not going to be highly disruptive. This year. So at least with regard to those projects. We wouldnt expect if we did those started those projects at the end of next year that they would be highly disruptive.
Marcel Verbaas: So at least with regard to those projects, we wouldn't expect if we did those started those projects at the end of next year, that they would be highly disruptive.
Marcel Verbaas: And the other piece is selling Fairmont Dallas, I mean, that that if we had held that we would have a large scale renovation to do. https://www.kenhub.com that minimizes overall disruption. Relative to having continued to own that property. And that was clearly, it was Barry's point as far as the seasonality on those assets is that whether we do it this year or we do it next year, you kind of do it in that same time frame. No matter what kind of the overall market conditions are, even if the market conditions are stronger, we're still doing it at a time that historically, and we've owned these assets for a pretty long time at this point.
Speaker Change: And the other piece is obviously selling Fairmont Dallas.
Speaker Change: If we had held that we.
Speaker Change: We would have a large scale renovation to do at some point in the near future and that would've been very disruptive so.
Speaker Change: That minimises overall disruption significantly over the next few years relative to having continued to on that property.
Speaker Change: And that was clearly those various point as far as the seasonality on those assets.
Speaker Change: What do we do it this year or we do it next year, if you kind of do it and at the same timeframe no matter what kind of the overall market conditions are even if the market conditions are stronger.
Speaker Change: We're still doing it at a time that historically and we've owned these assets for a pretty long time at this point. So we haven't very good sense of what the right time frames are to do these type of projects, where we're really going to very much limited the limited disruption.
Marcel Verbaas: So we have a very good sense of what the right time frames are to do these type of projects where we're really going to very much, you know, limit the disruption. Whether it happens, you know, obviously not this year, but if we decide to do it next year, then, you know, we're still not viewing it as disrupt. Okay, really helpful.
Speaker Change: Whether it happens is obviously not this year, but we decided to do it next year then.
Speaker Change: We're still not viewing it as.
Speaker Change: Relative to the guest experience or Utah.
Speaker Change: Okay really helpful and what portion of that $25 million reduction in Capex guidance is related to the fair Mark.
Marcel Verbaas: And what portion of that $25 million reduction in CAPEX guidance is related to the Fairmont? It's a little, you know, it's a little north of 10 million. There was a good amount of infrastructure work that was planned for the property in the event that we weren't going to be selling this asset this year. You know, clearly this is a project that we've been working on for a while and did a lot of analysis, really over the last couple of years, as far as what would be the appropriate level of renovation to potentially do with this asset versus a potential sale.
Speaker Change: It's a low hanging out it's a little north of $10 million.
Speaker Change: There was a good amount of infrastructure work that was planned for the property in the event that we werent going to be selling this asset this year.
Speaker Change: Clearly this is a project that we've been working on for a while.
Speaker Change: <unk> did a lot of analysis.
Really over the last couple of years as far as what would be the appropriate level of renovation to potentially do with this asset versus a potential sale. So.
Marcel Verbaas: So, we obviously decided to go down the path of potential sale process and you know, we're very pleased with how that played out and being able to get the value that we did for the asset. For us, it became a very clear, you know, capital allocation decision to say, let's sell the asset as opposed to doing this really highly disruptive renovation. So, with that being said, we obviously had to plan for potentially doing work there this year that had to be done regardless of whether you were doing a significant renovation or not. So, there was a good amount of infrastructure work that was going to have to happen there and you know, we obviously were able to avoid that now by doing this.
Speaker Change: We obviously decided to go down the path of a potential sale process.
Speaker Change: We're very pleased with how that played out and being able to get the value that we did for the asset for us It became a very clear capital allocation decision to say, let's sell the asset as opposed to doing is really highly disruptive renovation, so but that being said, we obviously have to plan for potentially doing work. There. This year that will have to be done regardless.
Speaker Change: But what are you were doing a significant renovation or not so it was a good amount of infrastructure work that was going to have to happen there.
Speaker Change: And we obviously were able to avoid that now by doing this sale as well.
Marcel Verbaas: All really helpful color. Thank you.
Speaker Change: All really helpful color. Thank you.
Speaker Change: Welcome.
Unknown Executive: Just as a final reminder, if you'd like to ask a question, please press star followed by one.
Speaker Change: Just as a final reminder, if you'd like to ask a question. Please press star followed by one.
Marcel Verbaas: And as we currently have no further questions in the queue, I will hand back over to Marcel Verbaas, Chair and CEO, for any final remarks. Thanks, Carla. Thanks, everyone, for joining us today. I know it's been a busy few days with lodging companies reporting. We were glad to be able to do this update today. We obviously had a great first quarter. I think we're well-positioned for the remainder of this year, no matter what economic circumstances we'll be dealing with. And we look forward to seeing many of you over the next few days. Thank you, everyone.
Speaker Change: And as we currently have no further questions in the queue.
Marcellus Airbus: I'll hand back over to Marcellus Airbus Chair and CEO for any final remarks.
Marcellus Airbus: Thanks, Carla thanks, everyone for joining.
Speaker Change: Turning us today I know, it's been a busy few days with the lodging companies reporting.
Speaker Change: We were glad to be able to do this update today, we obviously had a great first quarter I think we're well positioned for the remainder of this year and no matter, what's economic circumstances, we'll be dealing with and we look forward to seeing many of you over the next few months.
Speaker Change: Thank you everyone. This concludes today's call have a great day you may now disconnect.
Unknown Executive: That does conclude today's call. Have a great day. You may now disconnect.
Speaker Change: [music].