Q2 2025 Host Hotels & Resorts Inc Earnings Call

Ladies and gentlemen, thank you for standing by today is conference is scheduled to begin shortly until that time your line will remain on musicals. Thank you.

Good morning and welcome to the host hotels and Resort second quarter 2025 earnings conference call. Today's conference is being recorded at this time. I would like to turn the call over to Jamie Marcos, senior, vice president of investor relations. Please go ahead.

Thank you and good morning everyone.

Before we begin, please note that many of the comments made today are considered to be forward-looking statements under Federal Securities laws.

As described in our filings with the SEC, these statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed.

And we are not obligated to publicly update or revise, these forward-looking statements.

in addition on today's call we will discuss certain non-gaap financial information such as ffo

adjusted Eva re and comparable hotel level results.

You can find this information together with reconciliations to the most directly comparable gaap information in yesterday's earnings press release.

In our 8K filed, with the SEC.

And in the supplemental financial information on our website at Host, hotels.com.

With me on today's call are Jim rosolio president and chief executive officer and sarov. Gosh Executive Vice President and Chief Financial Officer.

With that. I would like to turn the call over to Jim.

Thank you. Jamie and thanks to everyone for joining us this morning.

We are proud to have achieved another strong quarter of operating and financial results leading to outperformance in the first half of 2025.

In the second quarter, we delivered adjusted ebit of 496 million, an increase of 3.1% over last year and adjusted ffo per share of 58 cents. An increase of 1.8% over last year.

Second quarter adjusted, even to re and adjusted ffo per share. Benefited from 9 million of business. Interruption proceeds related to hurricanes Helen and Milton. While the second quarter of 2024 benefited from 30 million dollars of business, Interruption proceeds related to Hurricane Ian and the Maui wildfires.

Comparable Hotel, total, repar, improved 4.2% compared to the second quarter of 2024 in comparable hotel. Red par improved 3% driven by stronger transient demand, higher ADR and more ancillary spend,

Comparable Hotel, IBA margin declined by 120, basis points year-over-year to 31%.

Driven by a 120 basis, point impact from business, Interruption proceeds that were received last year for the Maui wildfires.

The operational results discussed today, refer to our 78 Hotel comparable portfolio in 2025 which excludes the alila Ventana. Big Sir the Don CeSar and the Westin Cincinnati which we sold in June.

Turning to business mix repart growth in the second quarter was better than expected driven by Leisure transient demand and rate growth, despite a continuation of the international demand imbalance.

We saw particularly strong performance in Maui, Miami Orlando, Atlanta, New York, the Florida Gulf Coast, and San Francisco.

Transient Revenue grew by 7% driven by both the Easter calendar shift and the ongoing recovery in Maui.

The latter of which accounted for approximately 40% of the transient Revenue growth in the quarter.

Transient demand recovery continued driving Maui's strong results for the second quarter.

Maui's 19%, repar growth. Provided a 100 basis point benefit to a portfolio. Red card growth in the quarter.

Total repar at our 3, Maui Resorts was also up 19%.

Driven by robust growth in fmbb Outlets as well as Golf and Spa Revenue a clear indication that the recovery in Maui is well underway.

Turning to business Transit Revenue was relatively flat in the second quarter as the manned decreases were nearly offset by rate.

As expected.

Group room, Revenue, decrease 5% year-over-year driven primarily by the Easter calendar shift.

Planned renovation disruption from the higher transformational Capital program.

Business mix shifting from group to transient in Maui and reduced group pickup.

It's 1.1 million group room nights in the second quarter, and our definite group room nights on the books increased to 3.8 million for 2025.

Total group, Revenue pace is up 1.6% to the same time last year.

ancillary spending by guests at our properties remain, strong as illustrated by our 4%, total rep part growth in the second quarter,

FNB Revenue was up 4% driven by Outlet revenues, banquet Revenue. Grew by 1% as contribution per group room night, outpaced, absolute group room night declines.

We also saw particularly strong growth in other Revenue, which was up 13%, including Golf and Spa.

Turning to the Don CeSar.

During the second quarter, we completed the North Pole in pool bar.

In early July, we completed the marketplace and lower-level retail spaces.

In the third quarter, we expect to complete the final phase of reconstruction, including the lower-level kitchen and two FNB outlets.

Since the reopening we are seeing better than expected near-term, transient pickup, higher, FNB capture, and average, texts, and increased group bookings, which allows us to raise our full year. Expectations for the resort to 3 million dollars from negative - 1 million.

We collected $9 million in business interruption proceeds per hurricane, to lean, and Milton in the second quarter, bringing the total business interruption proceeds collected to $19 million for the first half of the year.

We also collected an additional $5 million of business Interruption proceeds in July related to those 2 hurricanes, which are included in our updated guidance.

While we expect to collect additional business, Interruption precedes, the timing and amounts of additional payments are subject to stabilization of the asset and ongoing discussions with our insurance carriers.

Attorney to Capital. Allocation in June, we sold the 456 key, leasehold interests and the Wesson Cincinnati for $60 million or 14.3 times to trailing 12-month Ava,

when calculating the even of multiple, we included 54 million of estimated disrupted, Capital expenditures over the next 5 years,

since 2018.

We have disposed of approximately $5.1 billion of hotels at a blended 17.2 times EBITDA multiple, including estimated foregone capital expenditures of $1 billion. This compares favorably to our $4.9 billion of acquisitions over the same period at a blended 13.6.

6 times, even a multiple.

In addition to dispositions, we repurchase 6.7 million shares of common stock during the second quarter.

At an average price of $15.56 per share for a total of $15 million.

Bringing our total purchases to 205 million year to date at an average price of $15.68 per share.

Since 2022. We have repurchased 520 million of stock at an average we purchase price of $163 per share. And we have 480 million of remaining capacity under our share repurchase program.

Percent complete and is tracking on time and under budget.

We completed the guest rooms Renovations at the Grand Hyatt, Washington, DC, and positive remaining public space renovations to accommodate Group business on the books while we complete the comprehensive Renovations at higher, Regency Capitol Hill.

We also started comprehensive Renovations at the Manchester Grand Hyatt. San Diego, the final property in the higher transformational Capital program which we expect to complete in early 2027.

We continue to make progress on value. Enhancing development projects, including the Don CeSar Ballroom expansion and The Phoenician, Canyon Villa Suites, both of which, we expect to complete in the fourth quarter of 2025.

We also made progress on the condo development, at the 4 Seasons Resort Orlando at Walt Disney World Resort.

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

We now have the deposits and purchase agreements for 20 of the 40 units, including 8 of the 9 Villas.

In 2025, our capital expenditure guidance range is 590 to 660 million which includes between 70 and 80 million per property damage reconstruction, majority of which we expect to be covered by insurance.

Our capex guidance also reflects approximately 270 to 305 million of investment for redevelopment repositioning in an Roi projects.

As part of our climate risk and resiliency program, we purchase flood barriers for 9, high risk, properties, with measures being put in place for the 2025 hurricane season.

We also developed a resiliency Roi method and expanded the program to new hotels with a focus on emergency power and Wildfire risk.

Within the highest transformational Capital program. We expect to complete Renovations at the higher Regency, Austin and the higher Regency Capitol Hill in the second half of this year.

As a reminder, we expect to benefit from approximately 27 million of operating profit guarantees related to the higher transformational Capital program in 2025,

Which we expect will offset the majority of the ebit of disruption at those properties.

In addition to our capital expenditure investment, we expect to spend $75 million to $85 million on the condo development at the Four Seasons Resort Orlando at Walt Disney World Resorts this year.

Looking back at prior, transformational Renovations, we completed investments in 24 properties, between 2018 and 2023.

Which are continuing to provide meaningful tailwind for our portfolio.

Of the 20s that have stabilized post renovation operations to date.

The average rep Park index, share, gain is over 8.7 points, which is well in excess of our targeting, gain of 3, to 5 Points.

Turning to our outlook for 2025. Despite the heightened macroeconomic uncertainty, we continue to outperform our expectations in the second quarter.

As a result of our strong performance in the first half of the year, we are increasing our comparable hotel.

Rapar in total. Repar, guidance ranges.

As Sarago discussed in more detail.

The low end of our guidance range contemplates. Softer demand in the second half of the Year, while the high-end assumes, a more stable, macroeconomic environment.

Similar to last quarter. We are also providing an approximate rule of thumb for the current environment based on how our portfolio is positioned today.

For every 100 basis point change in red part, we would expect to see a 32 to 37 million change and adjusted EV which is consistent with the range we provided last quarter.

As we have said, many times before host is well, positioned to weather any environment because of our Fortress investment grade balance sheet, a leverage ratio of 2.8 times.

Our size and scale our Diversified business and Geographic mix and our continued reinvestment in our portfolio.

We will continue to use our competitive advantages to create value for our shareholders and position host to outperform over the long term.

I'll turn the call over to Rob.

Thank you, Jim and good morning, everyone.

Building on Jim's comments. I will go into detail on our second quarter operations.

Updated 2025 guidance and our balance sheet.

starting with total, revenue Trends, comparable Hotel, total rev Park growth outpaced rev Park growth, as both group and Transit, guests maintained, elevated levels of out of room spending

Comparable Hotel food and beverage Revenue grew 4% in the quarter driven by Outlets.

Outlets Revenue, grew 9% driven by transient room night growth in Maui, as well as recently repositioned Outlets, including the view at the New York Marriott Marquee. Aiv at the 1, South Beach and outlets at the singer Oceanfront Resort.

Properties in Orlando, Nashville and Naples. Also contributed to our growth.

Banquet Revenue, grew 1% as increases in banquet and catering contribution per group room night outpaced decreases in group room night volume.

Banker and Catering contribution was up 7% in the quarter.

Signaling, the continued health of group spending?

Growth was driven by our large group hotels in San Diego, San Francisco, New York, Orlando and Naples.

Other Revenue grew 13% in the second quarter as Golf and Spa revenues continue to grow.

This is further indication that the high-end consumer is prioritizing spending on premium experiences.

Shifting to business. Mix overall, transient Revenue was up 7% compared to the second quarter of 2024 driven by higher rates and the continued growth of transient grooming nights at our Resorts led by Maui.

During the second quarter, our Resorts saw modest transient rage growth year-over-year alongside 21% transient room night growth, which benefited from the Eastern calendar shift and the recovery in Maui.

Excluding Maui transient Revenue at our Resorts was up in the mid teens driven by our Resorts in Orlando, Oahu and Miami.

Looking at recent holidays revenue for Memorial Day. Weekend was up over 2% driven by our resorts in Maui, Miami Orlando and Naples.

Revenue for July, 4th was down 1% for the comparable portfolio.

Our Resorts were up 6%, but storms over the holiday weekend, heavily impacted short-term pickup at many of our properties.

Business Trends and revenue was relatively flat to the second quarter of 2024. As 6% rate growth nearly offset business, transient luminite declines.

It is worth noting that corporate negotiated room night volumes were down slightly which is in line with recent quarters.

As a reminder, we expect business, transient Revenue to remain flat for the remainder of this year, as a result of the uncertain, macroeconomic environment.

Turning to group, as expected, revenue was down 5% year-over-year, driven by planned renovation disruption from the high, transformational capital program and business mix shifting from group to transit in Maui.

Group room, Revenue also faced headwinds from the Easter calendar shift and reduced group pickup.

Despite these headwinds a property is in San Francisco. Achieved group Revenue growth of more than 30% driven by meaningful Citywide recovery.

A risk Falls Inn Resorts in Naples, Florida. Also benefited by strategically adding high-quality groups in the quarter.

For a full year 2025 we have over 3.8 million definite group room knife on the books. Representing a 6% increase since the first quarter as Jim mentioned, total group Revenue. Pace is up 1.6% over the same time last year.

As we discussed last quarter, we have seen software short-term group pickups, particularly for the third quarter, due to macroeconomic uncertainty. That said, rates continued to grow across the portfolio for bookings made in the second quarter for the rest of 2025.

We also continue to see double digit Citywide booking Pace in many of our key markets, including San Francisco San Antonio and New Orleans.

Below the second quarter of 2024, which includes a 120 basis point impact from business. Interruption proceeds, we received for the Maui wildfires last year

outside of the bi proceeds impact margin performance. In the second quarter was the result of strong Revenue growth, as well as higher HPC guarantee amounts, which offset headwinds from elevated wage rate growth.

We continue to expect negative year-over-year margin comparisons for the remainder of the year, primarily driven by elevated wages and benefits.

On the Insurance Fund, our June 1st property, renewal came in meaningfully better than expected at down 4% compared to last year, which equates to a 14 million expense reduction compared to our prior guidance.

This savings has been reflected in our updated guidance.

Turning to our outlook for 2025. As Jim mentioned, we are increasing our comparable Hotel, rep bar, and total rep for guidance ranges, as a result of our outperformance, in the first half of the year.

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

At the low end of our guidance, we assume softer demand in the second half of the year. And at the high end, we have assumed improvements in the overall macroeconomic environment driven by Clarity on trade and other policies.

A full year 2025 guidance, contemplates comparable, Hotel ref, paw growth of between 1 and a half percent and 2 and a half percent over 2024.

We expect comparable Hotel. Ibra margins to be down 90 basis points year-over-year at the low end of our guidance to down 60 basis points at the high end.

A 60 basis points improvement over our prior guidance at the midpoint.

Consistent with our prior guidance. We expect negative year-over-year Webb Park in the third quarter.

Driven by software short-term group volume and slightly positive, rep P growth in the fourth quarter.

The midpoint assumes comparable Hotel, repa growth of 2% compared to 2024 and the comparable Hotel IBA margin of 28.6% which is 70 basis points below 2024,

As we think about bridging, our 2024 results to 2025.

We estimate 100 basis point, impact to full ear comparable Hotel IBA margin from wage and benefit rate increases and a 40 basis. Point impact from lower business, Interruption proceeds in the comparable portfolio with a partially offset by an estimated 70 basis. Point benefit from operational improvements.

For the full year, we continue to expect overall wage and benefits expenses to increase 6%.

Which comprises approximately 50% of our total Hotel operating expenses.

Our 2025 full year adjusted, Evita re midpoint is 1,705 million. This will present a 60 million or 3.6% improvement over our prior guidance, midpoint driven by outperformance, in the first half of the year.

This includes 19 million of business. Interruption proceeds that will receive in the first half of the year for Hurricane pollen and Milton and an additional 5 million dollars of business. Interruption proceeds that were received in July,

Our 2025 full year, adjusted ibitta Ari. Midpoint also includes 25 million of estimated IBA from the 4 Seasons condo development, which we expect to recognize concurrent with condo sale, closings in fourth quarter.

lastly, our midpoint includes an estimated dollar contribution at the dawn, Cesar

and an improvement of $4 million since the last quarter and an estimated $13 million contribution from the operations at Allina Big Sur, both of which are excluded from our comparable hotel set in 2025.

turning to a strong balance sheet and liquidity position in Maine. We redeemed, the 500 million series emotes which matured in June with proceeds from the recent 500 million 5.7% Series M notes issuance

our weighted average maturity is now 5.4 years at a weighted average interest rate of 4.9%

79 million of FFN Evers and 1.5 billion dollars available under the revolver portion of the credit facility.

A quarter end. Leverage ratio was 2.8 times.

In July, we paid a quarterly cash dividend of 20 cents per share. As always future Dividends are subject to approval by the company's board of directors.

We will continue to be strategic in managing our balance sheet and liquidity position as we move through the rest of the year.

Wrapping up, we believe our strong investment grade balance sheet as well as our size scale, and diversification uniquely position host to execute in the current environment, while capitalizing on opportunities, for growth in the future.

With that, we would be happy to take your questions to ensure we have time to address as many questions as possible. Please limit yourself to 1 question.

As a reminder to ask a question, press *1 on your keypad.

Your first question comes from the line of Dwayne.

Denning work with evercore isi. Please go ahead.

Of room nights on the books up 6%, uh, sequentially versus the last quarter and, and your 3Q. Uh, group commentary, I assume. This means you're seeing groups further out, uh, for 26 and Beyond, uh, continue to book. But maybe you could just talk a little bit about, uh, the group dynamics that you're seeing, you know,

second half and then, and then longer term.

Hey, hey Dwayne, it's Jim. Uh, can you say can you say the question over? We didn't catch the first part of it. Uh, I think you're on mute. So if you if you wouldn't mind restating we'd appreciate it.

Sorry about that. Yeah, just, um, help us match up the commentary of room nights on the books, up 6% versus last quarter.

Versus the 3Q commentary that you're making. I assume that means you're seeing group bookings further out into 26 and Beyond.

Um, hey Dwayne, it's off. So, yes. Um, just to put it into perspective. When we started off the year, we had an expectation of, uh, achieving about 4.3 million group room nights, and you may recall last quarter. Um, we took our forecast for overall group room night, stand by about 100,000 room nights. So we were at about 4.2, um, based on what we are seeing in terms of,

Softening sort of short-term group pickup. Uh, we looked at the second half, particularly the third quarter and took out about another 75 to 77,000 group room nights. So we are 3.8 million group room nights which we have on the books. And now our expectation for the full year is approximately 4.1 million group room nights. Um that said uh, when you look out into the future, as you were saying our 26th to 28th, we had messages last time, that that group pays was in the higher single digits, um, that actually improved slightly from the last quarter. So yes, we see groups continuing to book out into the future, it's more. The short-term pickup particularly in the third quarter, um, that we have taken some risk off the table. Uh, just to put some numbers around a sort of what we picked up in the second quarter for the remainder of the year. Uh, we picked up 215,000 group room nights for the remainder of the year and about 20%.

Call it was for Q2 and up to 80% of that was for the rest of the year.

Um and if if you look at your competitor 2024, that was uh about 311,000 groups from tonight so definitely somewhat softening in terms of the third quarter. But as we look at particularly in the future uh it's strong and the only other thing I'd add is the group rate that we booked into the second half is extremely strong as well. So that continues

I could really show up.

Thank you.

Your next question comes from the line of Chris Warona with Deutsche Bank. Please go ahead.

Back half of the year and maybe any early on 26. Thanks.

Yeah, Chris. I I'll start and start Kim. Feel free to jump in. If he has additional color, he wants to add. But, uh, we are, uh,

Of the opinion that Maui's, uh, recovery is is firmly underway. Uh, you know, we had 19% red card growth, uh, in the quarter for our Mauri Resorts um, that was matched by 19%, uh, uh, out of room spend, as well really, uh, driven by Outlet growth. Um, uh, the the recovery is being fueled by Leisure transient and uh, it's a, uh, somewhat of a, a new phenomenon for Maui. Uh, because the booking window uh, is very short term.

you know, we had said that, um,

We anticipated Maui uh to contribute a hundred million dollars of ibida. Uh, this year uh, for the portfolio. Um, you know, we are not assuming that the the Maui Resorts will contribute million dollars, so we're seeing, you know, very positive momentum. Um, there's no question about it, uh, going forward, uh, you know, I, I think this is fueled in large part, uh, by a marketing campaign that a group of Hotel owners, uh, banded together to undertake, uh, marketing, individual properties, uh, combined with the, uh,

State of Hawaii, led by the governor, uh, who, uh, endorsed and and sponsored a, I think about a 6.3 million marketing campaign as well. So when people see what is happening on the island, uh, and you were there, uh, in February, um, you know, you know that, uh, uh, it, it, it's open for business. And, you know, W Leah is a great place to be, uh, you know, the, the west side where the higher Regency is, uh, is, uh, is is a, a great place to visit as well. It's a, it's I think the probably the best group Hotel on the island. And that's, uh, that's what we have to see happen, uh, to really, uh, get back to where we were pre-fire levels. Uh, we have to start seeing, uh, the, um, the incentive groups, come back to a Hawaii and, uh, we're we're getting good traction with Meeting Planners. Uh, they're, uh, they're taking trips, uh, called fam trips.

Fam familiarization trips, so they can just go see what is happening on the island. Um, there's a long lead time for uh, uh incentive group bookings, uh to occur. It's at least 6 months, and it can be, you know, a year or longer in some instances. So we expect to see, uh, the group Pace pick up, uh, as we get into 2026 and 27, uh, and Beyond. Uh, but Maui is definitely open for business and uh, we're we're really pleased with what we're

See, the other thing that has to happen. Uh, Chris says we have to uh, um,

Uh, see additional airlift made available. Uh, you know, it's a, it's a bit of a chicken, and an egg, uh, situation where the airlines are not going to want to bring additional capacity back online until, uh, they, uh, have a, a good, uh, feeling about, uh, their ability to fill those seats. Uh, you know, and, and vice versa, you know, we we

We don't want, uh, our customers to want to come to Hawaii and not be able to find a seat on an airplane. So, uh, compared to where we were pre- Wildfire, uh, in terms of Airline capacity in the Maui, we're down about 20%. So, um, you know, we're, we're hopeful that that's going to change over time. Uh, the the recovery is well underway. Uh, you know, in addition to the outlet Revenue, uh, we saw a meaningful pickup in spa, spa revenue and golf Revenue as well. So people are definitely coming in their spending.

Okay. Thanks. Jim.

Your next question comes from the line updated cats with Jeffrey. Please go ahead.

Par right? It it that was sort of out for 2q, I believe. Right? And is that sort of done by 3Q and in there those are my what are 2 questions? Thanks.

You know, Turtle Bay the hotel, proforma the hotel operations, David are uh exceeding our proforma expectations. Uh, so, you know, it's been well received uh uh, into the Ritz Carlton system. Uh, bonvoy, uh, is driving a lot of business to the property. Uh, it, uh,

I I wouldn't say that there any negative surprises uh, with respect to Hotel Ops uh, at all the property is performing well. Uh, we've had a change of plans with respect to uh, our repositioning and uh, uh, renovation of the Fazio golf course, you may recall from your visit that that there are 2 golf courses on property. The Fazio and the Palmer, uh, you know, we have least the Palmer Course to, uh, the developer that, um, that is developing some residential uh, units that adjacent uh, to the pro uh to uh the resort itself Arte development. Uh and um, and we own continue to own, uh, the Fazio course, uh, for a number of reasons, we've made the decision that we're not

Not going to reposition and um and upgrade the fusio course at this point in time. Uh but we're going to spend the time really preparing. Um

The, uh, site for potential, uh, future development, uh, while we have the opportunity to do that. So, if you're seeing a shortfall in operating performance for the resort in total, uh, it's as a result of the gulf, it's not as a result of the hotel and I'll let Saab address. Your other questions, uh, regarding comp non-comp

Uh, yeah, it is actually in our comparable results. Um, we did not own the hotel. However, we do have the actual numbers and performance from that hotel, so it is not comparable numbers. You just have to look at the comp tables.

Got it. Okay. So it's in 2. I have a page 10, I believe.

Okay, perfect. Thank you.

Your next question comes from Smitty's. Rose with Citigroup, please go ahead.

Hi. Thank you. Um, I wanted to ask a little more about, um, wages and benefits he mentioned that they're tracking up 6% for this year. Um, can you maybe, um, throw out, just give some thoughts on be interesting to see what are the components of that like labor versus, you know, benefits, um, to employees and kind of how you're thinking about my Pace into next year.

Um sure. Um when you think about sort of overall, it really is obviously Market dependent. It is being driven by where there was CBA negotiations finalized and that's driving a, a big piece of the increase for this year, just given the front loading impact. Um, for for next year, all I can tell you that it is going to be overall um, lower than where it is this year, that's the expectation, but it's too early to tell frankly because we haven't seen budgets from a manager yet and we will not see that until later. Um, so can't really comment on an exact number. But the expectation is the growth should be slightly lower than this year, what that is? Um, I can't comment right now.

Okay, thank you.

Your next question comes from R. Klein with BMO Capital markets. Please go ahead.

Thank thanks, and good morning. Um, Can can you talk a little bit about the uh Cadence for revpar growth? Um, in the second half of the year and specifically, what my drive, um, do for growth relative to the third quarter. And then, just a clarification on the insurance savings is the 1400 million.

Hey, all right. The $14 million is just what we expect to save for this year.

So that's what we have effectively. You would take out with use from our prior guidance of, uh, which we had at a billion 645. Um, it's a savings of 14 million from that number. So just this year,

And I um, was in October of last year, that's falling in September. So that's helping the fourth quarter and it's detrimental to the third quarter second, our big Hyatt. Um, our Grand Hyatt Manchester in San Diego, is, uh, under renovation, that's impacting group of pace as well. Um, the other big thing for the fourth quarter, that's helping you might recall that when there was elections, um, a week before and a week after elections, nobody was really booking. So that's actually uplifting your uh, Q4 uh, Pace numbers as as well. So the expectation of fourth quarter is is better as a result of that. So those are sort of the 3 components.

Thanks.

Your next question comes from the line of Robin Farley with UBS. Please go ahead.

Great, thanks. Um, can you talk a little bit about the, um, transaction environment? Just, you know, you sold an asset, just sort of broadly, put the environments like for that and also any opportunities to buy. And then I I do have 1, quick followup. Thanks.

Sure Robin, uh, let me start by saying that uh the debt Capital markets are wide open. Um, the cmbs market is wide open, it's very active at this point in time. Uh we've seen a uh notable pickup in transaction activity over the last 90 days or so. Uh it's so

Certainly not, I wouldn't characterize it as robust. Uh, it's certainly not at the levels that it has been in the past. Uh, you know, there is still a fairly significant uh bid ass spread uh, between buyers and sellers. Um, however, in certain instances we have seen that, uh, bid ask spread, uh, narrow, and, uh, transactions, um uh, get done. So, uh, we'll we'll see what happens as we get a bit more certainty. On the macro picture, uh, over the, uh, the remainder of this year. Uh, and uh, into 2026, I think that, uh, you know, the it's, it's still somewhat difficult, um, to underwrite, uh, uh, ah, ah, potential acquisition, uh, aggressively, uh, given the macro uncertainty right now and that may be holding some people back at this point in time, but our belief is that,

You know, a number of um assets have uh uh have not been uh, invested in, uh, you know, uh, since since Co day, so we're talking 5 years now. Uh, and that the properties are in in dire need of capital of capex. And, uh, you know,

Those that there's something is going to have to happen with those assets, uh, going forward. So I mean, we were in the really fortunate position as you know that uh we had the balance sheet that allowed us to uh invest in our assets. Uh and over uh the last 6 years, we have invested 1.7 billion dollars in Roi, capex, uh, in our properties. Uh, completed 24 transformation, Renovations uh all those 24 properties 20 have stabilized operations and we picked up close to 9 points in yield index. And that is, uh, that's 1 of the reasons why we continue to outperform. It's really our Capital allocation decisions, uh, that that have been made from 2017 forward. So, you know,

To answer the second part of your question, you know, are we interested in, uh,

Uh, in buying hotels, you know I'll never say never, but I will tell you, as we sit here today, it's not at the top of our list. Uh, you know, we think that, uh, the better use of our capital, uh, certainly in the second quarter, uh, in the first half of this year, has been investing in our assets, uh, so that we can continue to drive the types of returns that we're seeing, uh, you know, uh, paying a sustainable dividend, subject to the approval of, uh, our board of directors, and, uh, you know, buying back shares. Uh, we bought back $205 million worth of stock in the first half of the year, uh, and we...

I think the stock is, uh, a screaming bargain today, uh, given where it's valued relative to the quality of our portfolio and our Fortress balance sheet.

Right, that's super helpful. Thank you. Just just 1, quick clarification, following up, and maybe 1 for throughout, um, with the guidance. You know, you're getting a little more cautious on that sort of close in, um, you know, Q3 group bookings.

at least, you know, in in the very near term, um, something maybe a little bit,

Better than the sort of Delta you're talking about versus April.

Um, because it's a short-term business, I think that's kind of why we have taken some of the risk out of Q3. Is July trending well? I'm not in a position to give a number for July, but yes, it has certainly been trending well relative to our expectations. So could it get better? There's certainly a possibility, but it's really tough because these groups are sometimes really booking one week out or even a couple of days out. So, um, you know, I want to make sure we are appropriately cautious as we are doing our forecast.

Your next question comes from the line of Dan Pulitzer with JP Morgan. Please go ahead.

Hey, good morning everyone. And thanks for taking my question. Um I I I just want to follow up on the group commentary. Um, is there any more detail in terms of like leave volumes, you know, corporate versus Association? And then are you seeing actual changes in terms of the spending patterns from these groups in terms of some of that?

Yeah. So it's very similar to what we had talked about on the first quarter in terms of where we are, seeing some of the weakness in groups. Um, it certainly is a little more on the association side, um, particularly, um, as it relates to associations, that either rely on Government funding or somehow tied, uh, to Government funding. Um, in terms of the folks that are actually showing up to the hotels, they're spending well, so if you look at our second quarter results, group volume was down, but our banker and Catering Revenue was actually up. And we look at the, you know, bankruptcy ring revenue on a per group Road. My basis that was up 7%. So overall groups when they're coming to the hotels are actually spending and spending well and continue to spend. So that Trend really hasn't changed. And it's certainly um, you know, is it has the same momentum as it did, which we saw in the first quarter and we have that same expectation going into the groups that are going to be coming in in the in the third and fourth.

And fourth quarter as well.

Got it. Thanks so much.

Your next question comes from the line of Daniel Hogan with beard. Please go ahead.

Hi morning. Uh, just quickly on the Cincinnati sale. Um, looking at the rest of the portfolio, how many more assets are in need of that amount of capex or would be potential non-core sale candidates and how are, uh, both you and the and potential buyers thinking about those that amount of capex needs, uh, differently and is that, um, able to then get a deal across the line.

Uh, you know, the Cincinnati, uh, I would say probably ranked at the bottom of our portfolio Dan uh, you know, from a, a capex perspective, it's in a um, you know, it's in a tough Market, uh, a very low red par asset. Uh, it's subject to a ground lease what we sold was the leasehold interest and we really had an invested in that property, uh, since 2009. Uh, so, you know, I don't know of any other hotel in our portfolio. That is in that, um, uh, dire need of of capex. So we, we like what we own obviously, you know, if you look at the makeup of our portfolio, uh, our top 40 assets, uh account for over 80% of our ibida. Uh, we have 78 comparable, hotels, plus, um, you know, the elite of Ventana and uh the dawn uh, in uh, in 9 comp.

But that, that should give you a sense of, uh, the the magnitude of of ibida that something like a uh Western Cincinnati contributes to uh the overall uh earnings of hosts.

All right. Thank you.

Our next question comes from the line of Chris darling with Green Street. Please go ahead.

Hi. Uh, thanks for taking the question. Um, Jim, can you comment on the relative strength across sort of the high-end luxury hotel segment relative to what's really been a more sluggish demand backdrop for seemingly most of the rest of the industry? Um, to be candid with you, I'm kind of surprised the dynamic has lasted as long as it has. And I wonder what your perspective is on whether it persists, um, and also how your perspective may or may not inform your portfolio position going forward.

You know, we began the journey to reposition this portfolio in 201718 uh, you know, we we we sold and and our performance today is has to do as much with what we sold as with what we bought. So, you know, we disposed of uh 5.1 billion assets with a purchase price roughly of 5.1 billion dollars that needed significant capex, uh, of roughly a billion dollars, uh, uh, at a 17.2 times. Even a multiple, uh, and over the same time frame, um, you know, we acquired, uh, 4.9 billion dollars of assets at 13.6 times, uh, ibida,

And there was a keen focus on uh luxury. Uh and and and the focus on luxury uh is really informed by uh, our opinion, that the long time, long term red Park, hagars of luxury properties luxury, resorts in particular, uh, outperform, um other, uh, segment segmented hotels in in, in the industry. Uh, and I I think that, you know, has really proved itself out as we see no resistance really to uh, rate uh, at our at our Resort portfolio. Uh today uh and we see a uh continued uh increase in out of room spend by uh, customers uh, on a per occupied room basis.

At the outlets at spa at golf Etc. So, you know the affluent consumer is, uh,

Uh, clearly in a very good position. Uh, they want to continue to prioritize, uh, experiences, uh, and they're willing to spend money to do that. Uh, if you look at the performance of the various segments, uh, over the uh, second quarter, uh, you know, luxury was followed by upper upscale, which is where the rest of our portfolio is. Uh, you know, we outperformed the industry, uh, across the board, uh, and that has to do with the, the Investments that we made in our assets that I spoke to earlier. And then, as you move further down the chain scale where our our consumers, uh, the US consumers are stressed, uh, and you look at the economy segment. You see negative red par growth. So you know, I mean the the amount of wealth that in our opinion the amount of wealth that's been created in this country uh through housing and through the stock market um is substantial and uh you know we we like the way the the portfolio is positioned uh for the long term. Uh,

Obviously if you know, if if if if something were to go Ary uh and uh and and and people didn't feel as good about their balance sheets going forward, uh that would impact the business but we're certainly not seeing that at this point in time.

All right, helpful commentary. Thank you.

Please go ahead.

Uh, thank you very much and good morning.

Uh, could you provide some detail on how summer leisure demand from international inbound is performing relative to your expectations a few months ago?

Are there certain markets or property types performing better or worse? Thanks.

Uh, sure. So when you look at what happened with international outbound and modern fourth quarter, we had talked about, um, our, I would say, hope that that would somewhat moderate and, uh, it would effectively be a wash. We were expecting lower inbound travel, but we were also expecting lower outbound travel. Uh, in a way, that's kind of what happened—not to a very large degree, but net-net, it was effectively a wash. Um, if you may recall that in the fourth quarter, when it peaked in 2024, uh, outbound relative to 2019 was at 125% and inbound was at 94%. Um, that progressed, um, in Q1 2025 outbound became 1 to 124%. So,

Um, it has been relatively strong, um, overall, I mean there's certain markets um, currently driving that. I mean New York's driving that um whilst Seattle did see Canadian visitors. Um significantly decline our Western overall actually did well a lot of these markets where um we've seen declining Canadian travels, it has been made up by other European markets so that part hasn't had a um a meaningful impact 1 way or the other and kind of what we expected, no real change in the international inbound, outbound imbalance. Um, that sort of coming to fruition as far

Thanks for the help. Yeah, sure. Jim just say, hey, Greg just say a, a data point on New York. Uh, you know, I mean we the portfolio is position. We're over 90% of our revenues, uh, come from domestic US Travel. Uh, so there is, uh, there is a, you know, roughly 8 and a half 9%, uh, that that does come from, uh, International visitors to, um, the us but that, you know, I just want to follow up on what sir Rob said. Uh, he referenced New York as 1 of those markets, you know? Just for a point of reference, so you have a sense of how our assets are performing. Uh, the New York Marriott Marquee, um, uh, underwent a transformational renovation, beginning in 2019. So, as base year, 2018,

Um, uh, using 2018 as the base year, this year our red part is going to be up 16%.

our ibida at the Marriott Marquee is going to be up 46% over 2019 so 2000. Uh 2018, I'm sorry we did 66 million in ibida in 2018, we're on budget to do 96 million this year and that's on top of a 16%, uh, red par increase. So uh, you know, the health of our New York assets, uh, is very good and very strong

Thank you, Jim appreciate it.

Our final question comes from the line of Jack Armstrong with Wells Fargo. Please go ahead.

Hey, good morning. Thanks for taking the question. Just returning to Maui again here briefly, you know, we've heard from you and some of your peers that some of the strength we've been having their is related to promotional activity and obviously, you know, it's an uptick in transit of demand what what's the plan for Rolling off that promotional activity and and kind of replacing that Demand with fruit, you know, is that a late 2526 and is there a chance? Do you kind of get a stuck in in between those 2?

Yeah, just to be clear. It's, it's not like a, a group is not being pushed at these properties. So we, as Jim mentioned earlier, we are engaging with Meeting Planners, we are having fam trips, so that is progressing. And what's important to know? We are very encouraged by how 2026 is is pacing. Um, and at some point we'll provide very specific numbers on on on Maui group pace for 2026. But overall, when you look at sort of Maui and this is a ya as well as the hydro Regency kapali, they're effectively pacing very, very close at this point to where they were not only pre-fire, but pre-pandemic levels, so we are very encouraged by that. Remember, the lead times with these incentive groups is 9 to 12 months. So while it is going to take some time to pick up, we fully expect to have a much better group year in, uh, 2026, um, and just to put into perspective. Uh, so you have what the peak was

Was for now. Like in 2019 we did about a 100,000 group room nights or so in Maui. And this year, our expectation is call it around 81,000 and we certainly expect to improve on that into next year.

Great. Thank you.

Well, thank you all for joining us. Uh, we appreciate the opportunity to discuss our query results with you. Enjoy the rest of your summer and we look forward to seeing many of you at conferences this fall.

Includes today's presentation. You may now disconnect.