Q2 2026 Pebblebrook Hotel Trust Earnings Call

July 30, 2026

Speaker #3: me some of your job. It don't love. Every time I turn around, I'm looking up. You're looking down. Maybe something's wrong with you that makes you act the way you do. I'm gonna soak up the sun.

Speaker #3: blame. But every time I feel lame, I'm looking up.

Operator 2: Greetings, and welcome to the Pebblebrook Hotel Trust Q2 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Raymond Martz, Co-President and Chief Financial Officer. Thank you. You may begin.

Operator: Greetings, and welcome to the Pebblebrook Hotel Trust Q2 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Raymond Martz, Co-President and Chief Financial Officer. Thank you. You may begin.

Speaker #2: Hotel Trust second quarter earnings conference call. At this time, all participants are on a listen-only mode. A brief question-and-answer session will follow the formal presentation.

Speaker #2: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being now my pleasure to introduce your host, Raymond Martz, co-president and chief financial officer.

Speaker #2: Thank you. You may begin.

Speaker #4: Thank you, Christine. And good morning, everyone. Welcome to our second quarter 2026 earnings call. Joining me today are Jon Bortz, our Chairman and Chief Executive Officer, and Tom Fisher, our Co-President and Chief Investment Officer.

Raymond Martz: Thank you, Christine. Good morning, everyone. Welcome to our Q2 2026 earnings call. Joining me today is Jon Bortz, our Chairman and Chief Executive Officer. Tom Fisher, our Co-President and Chief Investment Officer. Before we begin, I'd like to remind everyone that our comments today are as of 30 July 2026. Today's comments may include forward-looking statements that are subject to various risks and uncertainties. Please refer to our SEC filings for a detailed discussion of these risk factors and visit our website for reconciliations of non-GAAP financial measures mentioned today. Let's get into the Q2 results. We delivered another excellent quarter, exceeding the high end of our outlook across every key earnings metric for the second consecutive quarter.

Speaker #4: But before we begin, I'd like to remind everyone that our comments today are as of July 30, 2026. Today's comments may include forward-looking statements that are subject to various risk and uncertainties.

Raymond Martz: Today's comments may include forward-looking statements that are subject to various risks and uncertainties. Please refer to our SEC filings for a detailed discussion of these risk factors and visit our website for reconciliations of non-GAAP financial measures mentioned today. Let's get into the Q2 results. We delivered another excellent quarter, exceeding the high end of our outlook across every key earnings metric for the second consecutive quarter.

Speaker #4: Please refer to our SEC filings for a detailed discussion of these risk factors, and visit our website for reconciliations of non-GAAP financial measures mentioned today.

Speaker #4: Now, let's get into the second quarter results. We delivered another excellent quarter, exceeding the high end of our outlook across every key earnings metric for the second consecutive quarter.

Speaker #4: Same-property hotel EBITDA increased 7.1% to $123.3 million, $6.6 million above the high end of our outlook. Adjusted EBITDA was $116.2 million, $6.2 million above the high end, and adjusted FFO per diluted share was $0.68, $0.06 above the high end.

Raymond Martz: Same property hotel EBITDA increased 7.1% to $123.3 million, $6.6 million above the high end of our outlook. Adjusted EBITDA was $116.2 million, $6.2 million above the high end, and adjusted FFO per diluted share was $0.68, $0.06 above the high end. The story of the quarter is straightforward. Our resorts and San Francisco-led portfolios. Stronger pricing drove total revenue growth. Our teams expanded margins and disciplined capital allocation activities amplified our per share growth. Let me take each in turn. At the portfolio level, same property occupancy increased approximately 130 basis points to 79.4%. ADR grew 4.7%, RevPAR increased 6.5%, and total RevPAR climbed 4.7%. Nearly three-quarters of our RevPAR growth came from rate, a meaningful shift from recent quarters when occupancy gains did most of the work.

Speaker #4: The story of the quarter was straightforward. Our resorts and San Francisco leather portfolio stronger pricing drove total revenue growth. Our teams expanded margins. And disciplined capital allocation activities amplified our per-share growth.

Speaker #4: Let me take each in turn. At the portfolio level, same property occupancy increased approximately 130 basis points to 79.4%. ADR grew 4.7%. Rep part increased 6.5%.

Raymond Martz: Let me take each in turn. At the portfolio level, same property occupancy increased approximately 130 basis points to 79.4%. ADR grew 4.7%, RevPAR increased 6.5%, and total RevPAR climbed 4.7%. Nearly three-quarters of our RevPAR growth came from rate, a meaningful shift from recent quarters when occupancy gains did most of the work.

Speaker #4: And total rep part climbed 4.7%. Nearly three quarters of our rep part growth came from rate. A meaningful shift from recent quarters when occupancy gains did most of the work.

Speaker #4: As occupancy rebuilds, greater compression is giving our teams more pricing confidence, which is supporting higher room rates. We also see less price sensitivity among upper-end consumers, benefiting our premium resorts and higher-end urban properties.

Raymond Martz: As occupancy rebuilds, greater compression is giving our teams more pricing confidence, which is supporting higher room rates. We also see less price sensitivity among upper-end consumers, benefiting our premium resorts and higher-end urban properties. Let's start with the leaders. Our resorts were the principal growth engine in Q2. Resort RevPAR increased 12%, and total RevPAR climbed 10.9%, supported by continued robust out-of-room spending. The strong revenue growth drove hotel EBITDA for our resorts up 18.5%, with 216 basis points of EBITDA margin expansion. LaPlaya led the way, with occupancy climbing more than 11 points, RevPAR increasing to 33.9%, and EBITDA rising 28.8% as its post-hurricane construction ramp-up continued. Paradise Point in San Diego was close behind, growing RevPAR 22% and EBITDA up by more than 40%.

Speaker #4: Let's start with the leaders. Our resorts were the principal growth engine in Q2. Resort rep part increased 12% and total rep part climbed 10.9%, supported by continued robust out-of-room spending.

Speaker #4: The strong revenue growth drove hotel EBITDA for our resorts up 18.5%, with 216 basis points of EBITDA margin expansion. Applied leatherway, with occupancy climbing more than 11 points, rep part increasing 33.9% and EBITDA rising 28.8% as its post-hurricane construction ramp-up continued.

Raymond Martz: The strong revenue growth drove hotel EBITDA for our resorts up 18.5%, with 216 basis points of EBITDA margin expansion. LaPlaya led the way, with occupancy climbing more than 11 points, RevPAR increasing to 33.9%, and EBITDA rising 28.8% as its post-hurricane construction ramp-up continued. Paradise Point in San Diego was close behind, growing RevPAR 22% and EBITDA up by more than 40%.

Speaker #4: Paradise Point in San Diego was close behind, growing rep part 22% and EBITDA up by more than 40%. Resorts generated roughly 16.5 million of the portfolio's 18.3 million dollar revenue increase, and their 8.9 million EBITDA gain more than offset the declines in urban markets held back by weaker convention calendars.

Raymond Martz: Resorts generated roughly $16.5 million of the portfolio's $18.3 million revenue increase, and their $8.9 million EBITDA gain more than offset the declines in urban markets held back by weaker convention calendars. More important than the headline growth was the broad nature of the improvement. At our resorts, group room nights increased 18%, and group revenue grew nearly 19%, led by association and corporate group demand. Transient ADR rose more than 12%, producing nearly 10% transient revenue growth on slightly fewer room nights. That powerful combination, rising group volume and stronger transient pricing, demonstrates the return on the capital we've invested in guest rooms, meeting spaces, outdoor venues, restaurants, and bars. Newport is a good example. RevPAR grew 20.3% on a 13.5% ADR increase, with total RevPAR growth of 18.6%, translating into EBITDA growth of almost 26%.

Speaker #4: More important than the headline growth was the broad nature of the improvement. At our resorts, group room nights increased 18% and group revenue grew nearly 19%, led by association and corporate group demand.

Speaker #4: Transient ADR rose more than 12%, producing nearly 10% transient revenue growth on slightly fewer room nights. That powerful combination rising group volume and stronger transient pricing demonstrates the return on the capital we've invested in guest rooms, meeting spaces, outdoor venues, restaurants, and bars.

Raymond Martz: Transient ADR rose more than 12%, producing nearly 10% transient revenue growth on slightly fewer room nights. That powerful combination, rising group volume and stronger transient pricing, demonstrates the return on the capital we've invested in guest rooms, meeting spaces, outdoor venues, restaurants, and bars. Newport is a good example. RevPAR grew 20.3% on a 13.5% ADR increase, with total RevPAR growth of 18.6%, translating into EBITDA growth of almost 26%.

Speaker #4: Newport is a good example. Rep part grew 20.3% on a 13.5% ADR increase with total rep part growth of 18.6%, translating into EBITDA growth of almost 26%.

Speaker #4: Estancia, another recent major development, generated RevPAR growth of 22.8%, total RevPAR growth of 19.6%, and EBITDA growth of 54.7%. Both of these resorts continue to gain share following their redevelopments and luxury repositioning.

Raymond Martz: Estancia, another recent major development, generated RevPAR growth of 22.8%, total RevPAR growth of 19.6%, and EBITDA growth of 54.7%. Both of these resorts continue to gain share following their redevelopments and luxury repositioning. San Francisco was once again our top urban market. Occupancy increased nearly 500 basis points, and ADR rose almost 9%, driving RevPAR 16% higher and hotel EBITDA 24.6% higher, roughly 250 basis points of margin expansion, all without the RSA citywide, which shifted to March this year. The Snowflake and Databricks citywides in June more than made up for the difference, and business transient and leisure demand were very strong beyond the citywides. Year to date, EBITDA at our seven San Francisco hotels is up by more than $13 million or 110% versus last year, making significant progress against the $18 million recovery opportunity detailed in our updated investor presentation.

Speaker #4: San Francisco was once again our top urban market. Occupancy increased nearly 500 basis points and the ADR rose almost 9%, driving rep part 16% higher and hotel EBITDA 24.6% higher roughly 250 basis points of margin expansion, all without the RSA citywide, which shifted to March this year.

Raymond Martz: Occupancy increased nearly 500 basis points, and ADR rose almost 9%, driving RevPAR 16% higher and hotel EBITDA 24.6% higher, roughly 250 basis points of margin expansion, all without the RSA citywide, which shifted to March this year. The Snowflake and Databricks citywides in June more than made up for the difference, and business transient and leisure demand were very strong beyond the citywides. Year to date, EBITDA at our seven San Francisco hotels is up by more than $13 million or 110% versus last year, making significant progress against the $18 million recovery opportunity detailed in our updated investor presentation.

Speaker #4: The Snowflake and Databricks citywide in June more than made up for the difference, and business transient and leisure demand were very strong beyond the citywides.

Speaker #4: Year to date, EBITDA at our seven San Francisco hotels is up by more than 13 million or 110% versus last year, making significant progress against the 18 million recovery opportunity detailed in our updated investor presentation.

Speaker #4: Los Angeles is following a similar path, but with less intensity. Rep part up 8.6%, hotel EBITDA up almost 14%, and year-to-date EBITDA higher by approximately 6 million or 73%.

Raymond Martz: Los Angeles is following a similar path but with less intensity. RevPAR up 8.6%, hotel EBITDA up almost 14%, and year-to-date EBITDA higher by approximately $6 million or 73%. Capturing the larger $22 million upside opportunity for our entire LA portfolio, as outlined in our investor presentation, will require continued market recovery and property-level execution. The 2027 Super Bowl and the 2028 Olympics will provide a big push. Our weaker urban markets included downtown San Diego, where RevPAR declined 9.1% against a difficult citywide comparison, and Washington, D.C., where RevPAR declined 9.9% amid weak government-related travel demand and significant property-level leadership transitions, which are now largely complete. Overall, urban RevPAR increased 4.1%, but urban total RevPAR increased only 0.8%, and urban hotel EBITDA declined 1%.

Speaker #4: Capturing the larger $22 million upside opportunity for our entire LA portfolio, as outlined in our investor presentation, will require continued market recovery and property-level execution, but the momentum is building, and the 2027 Super Bowl and the 2028 Olympics will provide a big push.

Speaker #4: Our weaker urban markets included downtown San Diego, where rep part declined 9.1% against a difficult citywide comparison. And Washington, DC, where rep part declined 9.9% amid weak government-related travel demand and significant property-level leadership transitions which are now largely complete.

Raymond Martz: Our weaker urban markets included downtown San Diego, where RevPAR declined 9.1% against a difficult citywide comparison, and Washington, D.C., where RevPAR declined 9.9% amid weak government-related travel demand and significant property-level leadership transitions, which are now largely complete. Overall, urban RevPAR increased 4.1%, but urban total RevPAR increased only 0.8%, and urban hotel EBITDA declined 1%.

Speaker #4: Overall, urban rep part increased 4.1%, but urban total rep part increased only 0.8%, and urban hotel EBITDA declined 1%. The strong performance in San Francisco and Los Angeles was offset by weaker convention calendars and bankrupt and catering revenue in San Diego and Boston, along with continued government-related weakness in Washington, DC.

Raymond Martz: The strong performance in San Francisco and Los Angeles was offset by weaker convention calendars and banquet and catering revenue in San Diego and Boston, along with continued government-related weakness in Washington, D.C. The result was a shift from group to transient demand, which is worth a closer look. Portfolio-wide, the quarter was transient led. Transient revenue was up nearly 10% on a 7% increase in ADR, concentrated in higher rate channels. Group revenue declined approximately 2%, while corporate group revenue was essentially flat. Importantly, the group softness reflected the convention rotation, not corporate demand pullback. That mix also helps explain the gap between the portfolio's 6.5% RevPAR growth and 4.7% total RevPAR growth. Out-of-room revenues grew 1.7%. Urban banquet and catering revenue declined approximately 20%, concentrated primarily where the citywide calendars were weakest and where World Cup matches scared off groups.

Speaker #4: The result was a shift from group to transient demand, which is worth a closer look. Portfolio-wide, the quarter was transient-led. Transient revenue was up nearly 10% on a 7% increase in ADR, concentrated in higher rate channels.

Speaker #4: Group revenue declined approximately 2%, while corporate group revenue was essentially flat. Importantly, the group softness reflected convention rotation, not corporate demand pullback. That mix also helps explain the gap between the portfolios 6.5% rep part growth and 4.7% total rep part growth.

Raymond Martz: Group revenue declined approximately 2%, while corporate group revenue was essentially flat. Importantly, the group softness reflected the convention rotation, not corporate demand pullback. That mix also helps explain the gap between the portfolio's 6.5% RevPAR growth and 4.7% total RevPAR growth. Out-of-room revenues grew 1.7%. Urban banquet and catering revenue declined approximately 20%, concentrated primarily where the citywide calendars were weakest and where World Cup matches scared off groups.

Speaker #4: Out-of-room revenues grew 1.7%. Urban bankrupt and catering revenue declined approximately 20%, concentrated primarily where the citywide calendars were weakest and where World Cup matches scared off groups.

Speaker #4: By contrast, resort food and beverage revenue grew nearly 11%, with bankrupt and catering revenue increasing more than 16%, on resort occupancy growth of 310 basis points.

Raymond Martz: By contrast, resort food and beverage revenue grew nearly 11%, with banquet and catering revenue increasing more than 16% on resort occupancy growth of 310 basis points. Where group and transient customers showed up, they kept spending and spending a lot. Looking at how the quarter developed, April started well with RevPAR rising 6%. May was the softest month as we flagged last quarter, up roughly 2% on later convention calendars. June accelerated sharply with RevPAR up nearly 12%, driven by an ADR increase of 14%. Occupancy actually dipped slightly, so June was entirely a pricing story. World Cup increased RevPAR modestly in June and in the quarter, but reduced non-room revenues. Jon will discuss the overall World Cup impact in more detail in his comments. That's the revenue story.

Speaker #4: Where group and transient guest customers showed up, they kept spending and spending a lot. Looking at how the quarter developed, April started well with rep part rising 6%, neighbors the softest month as we flagged last quarter up roughly 2% on later convention calendars, June then accelerated sharply with rep part up nearly 12%, driven by an ADR increase of 14%.

Raymond Martz: May was the softest month as we flagged last quarter, up roughly 2% on later convention calendars. June accelerated sharply with RevPAR up nearly 12%, driven by an ADR increase of 14%. Occupancy actually dipped slightly, so June was entirely a pricing story. World Cup increased RevPAR modestly in June and in the quarter, but reduced non-room revenues. Jon will discuss the overall World Cup impact in more detail in his comments. That's the revenue story.

Speaker #4: Occupancy actually dipped slightly so June was entirely a pricing story. World Cup increased rep part modestly in June, and in the quarter, but reduced non-room revenues.

Speaker #4: Jon will discuss the overall World Cup impact in more detail in his comments. So that's the revenue story. The earnings story is how effectively our teams turned that revenue into profits, and they did another great job.

Raymond Martz: The earnings story is how effectively our teams turn that revenue into profits, and they did another great job. They converted 4.8% total revenue growth into 7.1% same-property hotel EBITDA growth, with same-property total expenses increasing just 3.8%, and margins expanding 67 basis points to 30.6%. The discipline shows up across the P&L. Rooms expense grew at less than half the pace of rooms revenue, increasing only 3.1%, even as occupancy climbed 130 basis points and room revenue grew 6.6%. Energy expenses were also well contained, up 2.7% for the quarter and flat year to date, reflecting the benefit of our energy reduction and sustainability initiatives. On a per occupied room basis, total expenses increased just 2%, highlighting our team's continued positive results from our ongoing intense focus on operating efficiency.

Speaker #4: They converted 4.8% total revenue growth into 7.1% same property hotel EBITDA growth, with same property total expenses increasing just 3.8% and margins expanding 67 basis points to 30.6%.

Speaker #4: The discipline shows up across the P&L. Rooms expense grew at less than half the pace of rooms revenue, increasing only 3.1%, even as occupancy climbed 130 basis points and room revenue grew 6.6%.

Raymond Martz: Rooms expense grew at less than half the pace of rooms revenue, increasing only 3.1%, even as occupancy climbed 130 basis points and room revenue grew 6.6%. Energy expenses were also well contained, up 2.7% for the quarter and flat year to date, reflecting the benefit of our energy reduction and sustainability initiatives. On a per occupied room basis, total expenses increased just 2%, highlighting our team's continued positive results from our ongoing intense focus on operating efficiency.

Speaker #4: Energy expenses were also well contained, up 2.7% for the quarter and flat year to date. Reflecting the benefit of our energy reduction and sustainability initiatives.

Speaker #4: On a per-occupied room basis, total expenses increased just 2%, highlighting our team's continued positive results from our ongoing intense focus on operating efficiency. We're also completed our property insurance renewal on June 1st at premiums approximately $27% below last year, where $6 million lower, which was better than we anticipated, and a nice tailwind through next May.

Raymond Martz: We also completed our property insurance renewal on 1 June at premiums approximately 27% below last year or $6 million lower, which was better than we anticipated and a nice tailwind through next May. A more favorable insurance market helped, but so did a disciplined program design and the capital we've invested to harden weather-exposed assets. Let's turn to capital allocation, the part of the quarter you won't find in any same-property statistic. Despite losing approximately $5 million hotel EBITDA from hotels we sold and comparing against $3.2 million of prior year business interruption income, adjusted EBITDA declined less than 1%, and adjusted FFO dollars were essentially flat. A 4% decrease in diluted share count lifted adjusted FFO per share 4.6%, while retained free cash flow per share after dividends increased nearly 25%. This is what disciplined capital allocation should accomplish.

Speaker #4: A more favorable insurance market health, but so did a discipline program design and the capital we've invested to harden weather-exposed assets. Now let's turn to capital allocation, the part of the quarter you won't find in any same property statistic.

Raymond Martz: Let's turn to capital allocation, the part of the quarter you won't find in any same-property statistic. Despite losing approximately $5 million hotel EBITDA from hotels we sold and comparing against $3.2 million of prior year business interruption income, adjusted EBITDA declined less than 1%, and adjusted FFO dollars were essentially flat. A 4% decrease in diluted share count lifted adjusted FFO per share 4.6%, while retained free cash flow per share after dividends increased nearly 25%. This is what disciplined capital allocation should accomplish.

Speaker #4: Despite losing approximately $5 million in hotel EBITDA from hotels we sold, and comparing it against $3.2 million of prior year business interruption income, adjusted EBITDA declined less than 1%, and adjusted FFO dollars were essentially flat.

Speaker #4: A 4% decrease in diluted share count lifted adjusted FFO per share 4.6%, while retained free cash flow per share after dividends increased nearly 25%.

Speaker #4: This is what discipline capital allocation should accomplish: per share earnings and cash flow growing faster than company earnings despite asset sales. On the investment side, we invested $12.5 million in the portfolio during the quarter, and remained on track for 65 to 75 million for the full year.

Raymond Martz: Per share earnings and cash flow growing faster than company earnings despite asset sales. On the investment side, we invested $12.5 million in the portfolio during the quarter and remain on track for $65 to $75 million for the full year. This lower capital requirement converts more of our earnings into retained free cash flow for debt reduction and opportunistic repurchases of our common and preferred shares. During the quarter, we sold the Chamberlain West Hollywood Hotel for $43.5 million and used $26.1 million of the proceeds to retire $33.7 million in preferred shares at a 23% discount. That single transaction generated approximately $7.6 million of immediate value accretion and eliminated over $2 million of annual preferred distributions. Over the last eight months, we have sold three hotels for just shy of $160 million at an aggregate 15.4x EBITDA multiple and a 4.6% NOI cap rate.

Speaker #4: This lower capital requirement converts more of our earnings into retained free cash flow for debt reduction and opportunistic repurchases of our common and preferred shares.

Speaker #4: During the quarter, we sold a Chamberlain West Hollywood Hotel for $43.5 million, and used $26.1 million of the proceeds to retire $33.7 million in preferred shares at a $23% discount.

Raymond Martz: During the quarter, we sold the Chamberlain West Hollywood Hotel for $43.5 million and used $26.1 million of the proceeds to retire $33.7 million in preferred shares at a 23% discount. That single transaction generated approximately $7.6 million of immediate value accretion and eliminated over $2 million of annual preferred distributions. Over the last eight months, we have sold three hotels for just shy of $160 million at an aggregate 15.4x EBITDA multiple and a 4.6% NOI cap rate.

Speaker #4: That single transaction generated approximately $7.6 million of immediate $2 million of annual preferred distribution. And over the last eight months, we've sold three hotels for just shy of $160 million, and in aggregate $15.4 times even a multiple, and a 4.6% NOI cap rate.

Speaker #4: These sales, as the ones before, continue to validate the portfolio's private market value. The value creation playbook is simple: sell hotels at higher private market values, then use the proceeds to reduce debt, and buy back common and preferred securities at prices below their underlying value.

Raymond Martz: These sales, as the ones before, continue to validate the portfolio's private market value. The value creation playbook is simple. Sell hotels at higher private market values, then use the proceeds to reduce debt and buy back common and preferred securities at prices below their underlying value. During H1, we repurchased 0.9 million common shares at an average price of $13.62 and retired 1.5 million preferred shares at an average 23% discount to liquidation preference. Our balance sheet also continues to improve. Net debt to trailing 12-month corporate EBITDA declined to 5.3x from 5.5x at the end of Q1 and 5.9x at the end of 2025. We ended the quarter with $270 million of cash, $641 million of revolver availability, and $90 million of delayed draw term capacity, or a total of $1 billion of liquidity.

Speaker #4: During the first half, we've repurchased 0.9 million common shares at an average price of $13.62, and retired $1.5 million in preferred shares at an average 23% discount to liquidation preference.

Speaker #4: Our balance sheet also continues to improve. Net debt, the trailing 12-month corporate EBITDA declined to 5.3 times from 5.5 times at the end of Q1, and 5.9 times at the end of 2025.

Raymond Martz: Our balance sheet also continues to improve. Net debt to trailing 12-month corporate EBITDA declined to 5.3x from 5.5x at the end of Q1 and 5.9x at the end of 2025. We ended the quarter with $270 million of cash, $641 million of revolver availability, and $90 million of delayed draw term capacity, or a total of $1 billion of liquidity.

Speaker #4: We ended the quarter with $270 million of cash, $641 million of revolver availability, and $90 million of delayed draw term capacity or a total of $1 billion of liquidity.

Speaker #4: The remaining $350 million of the 2026 convertible notes are fully funded through existing cash, expected free cash flow, and term loan capacity, and we have no other debt maturities until 2028.

Raymond Martz: The remaining $350 million of the 2026 convertible notes are fully funded through existing cash, expected free cash flow, and term loan capacity. We have no other debt maturities until 2028. Stepping back, H1 demonstrates two forms of compounding: operating leverage of the hotels and disciplined capital allocation at the corporate level. Same-property hotel revenues increased 7.2%, same-property hotel EBITDA grew 14.5%, adjusted FFO per share improved 23.8%, and free cash flow per share surged 69% to $0.76 or $87.8 million. Each layer amplified the one before it. With that, I'd like to turn the call over to Jon for more color on current demand trends, event-related business, our markets, and the outlook for the balance of 2026. Jon?

Speaker #4: Stepping back, the first half demonstrates two forms of compounding. Operating leverage of the hotels and discipline capital allocation in the corporate level. Same property hotel revenues increased 7.2%, same property hotel EBITDA grew 14.5%, adjusted FFO per share improved 23.8%, and free cash flow per share surged 69% to 76 cents or 87.8 million.

Raymond Martz: Same-property hotel revenues increased 7.2%, same-property hotel EBITDA grew 14.5%, adjusted FFO per share improved 23.8%, and free cash flow per share surged 69% to $0.76 or $87.8 million. Each layer amplified the one before it. With that, I'd like to turn the call over to Jon for more color on current demand trends, event-related business, our markets, and the outlook for the balance of 2026. Jon?

Speaker #4: Each layer amplified the one before. And with that, I'd like to turn the call over to Jon for more color on current demand trends, event-related business, our markets, and the outlook for the balance of 2026.

Speaker #4: Jon?

Speaker #3: Thanks, Ray. Since Ray covered our second quarter performance in detail, I thought I'd step back and provide a more high-level view of both the industry and Pebblebrook.

Jon Bortz: Thanks, Ray. Since Ray covered our Q2 performance in detail, I thought I'd step back and provide a more high-level view of both the industry and Pebblebrook. Let's start with the industry's performance in Q2. As a reminder, the industry setup was very favorable in Q2. Benefits we expected from better holiday calendar, a uniquely active major events calendar, and the reconnection between GDP growth and industry demand growth, they all occurred in Q2. Going into the quarter, our concern revolved around the potential for geopolitical or policy events that would negatively impact the economy and travel. Fortunately, the conflict in the Middle East and constantly changing trade policies have not yet had a negative impact on the economy or US travel in general so far this year. As a result, industry demand growth was healthy in the quarter.

Speaker #3: So let's start with the industry's performance in the second quarter. As a reminder, the industry setup was very favorable in Q2. Benefits we expected from better holiday calendar, a uniquely active major events calendar, and the reconnection between GDP growth and industry demand growth, they all occurred in the second quarter.

Speaker #3: Going into the quarter, our concern revolved around the potential for geopolitical or policy events that would negatively impact the economy and travel. Fortunately, the conflict in the Middle East and constantly changing trade policies have not yet had a negative impact on the economy, or US travel in general, so far this year.

Jon Bortz: Going into the quarter, our concern revolved around the potential for geopolitical or policy events that would negatively impact the economy and travel. Fortunately, the conflict in the Middle East and constantly changing trade policies have not yet had a negative impact on the economy or US travel in general so far this year. As a result, industry demand growth was healthy in the quarter.

Speaker #3: As a result, industry demand growth was healthy in the quarter, and with little new supply being added, occupancies rose and ADR growth accelerated due to the better setup, more compression days, less price sensitivity by higher-end customers in particular, all of which led to more pricing confidence.

Jon Bortz: With little new supply being added, occupancies rose and ADR growth accelerated due to the better setup, more compression days, less price sensitivity by higher-end customers in particular, all of which led to more pricing confidence. All of the major hotel demand segments remained favorable. Group, corporate transient, and leisure travel all grew, weekdays and weekends alike. We even saw the international travel balance improve in June. Inbound travel turned positive for the first time in quite a while, presumably helped by World Cup visitors, while outbound travel declined. Both sides of that provide benefits for US hotels, more foreign visitors coming in and more Americans staying home. For Pebblebrook, as Ray described in detail, we saw the same industry benefits in Q2 and more, even though we had soft convention calendars in a number of our major markets.

Speaker #3: All of the major hotel demand segments remained favorable. Group, corporate transient, and leisure travel all grew, weekdays and weekends alike. We even saw the international travel balance improve in June.

Speaker #3: Inbound travel turned positive for the first time in quite a while, presumably helped by World Cup visitors, while outbound travel declined. Both sides of that provide benefits for US hotels, more foreign visitors coming in, and more American staying home.

Jon Bortz: Inbound travel turned positive for the first time in quite a while, presumably helped by World Cup visitors, while outbound travel declined. Both sides of that provide benefits for US hotels, more foreign visitors coming in and more Americans staying home. For Pebblebrook, as Ray described in detail, we saw the same industry benefits in Q2 and more, even though we had soft convention calendars in a number of our major markets.

Speaker #3: For Pebblebrook, as Ray described in detail, we saw the same industry benefits in Q2 and more. Even though we had soft convention calendars in a number of our major markets.

Speaker #3: During the second quarter, in the quarter, for the quarter pickup was very strong. Exceeding last year by 8.4 million dollars. We haven't seen any increase in group cancellations or attrition, and attendance levels for group meetings have been more predictable than last year.

Jon Bortz: During Q2, in the quarter, for the quarter, pickup was very strong, exceeding last year by $8.4 million. We haven't seen any increase in group cancellations or attrition, and attendance levels for group meetings have been more predictable than last year. We continue to watch for signs of weakening, but pickup in and for the month, quarter, and year has remained favorable. World Cup delivered a modest benefit to room revenues. We estimate an increase of between one and a half and two and a half million dollars, or roughly 60 to 100 basis points for the quarter in RevPAR. The incremental World Cup demand was largely offset by corporate group and transient business that stayed away due to higher rates and many booking restrictions. The net room benefit came primarily from rate, not occupancy. This also explains the slight June occupancy dip Ray mentioned.

Speaker #3: We continue to watch for signs of weakening, but pickup in and for the month, quarter, and year has remained favorable. World Cup delivered a modest benefit to room revenues.

Jon Bortz: World Cup delivered a modest benefit to room revenues. We estimate an increase of between one and a half and two and a half million dollars, or roughly 60 to 100 basis points for the quarter in RevPAR. The incremental World Cup demand was largely offset by corporate group and transient business that stayed away due to higher rates and many booking restrictions. The net room benefit came primarily from rate, not occupancy. This also explains the slight June occupancy dip Ray mentioned.

Speaker #3: We estimate an increase of between 1.5 and 2.5 million dollars, or roughly $60 to $100 basis points for the quarter in rev par. The incremental World Cup demand was largely offset by corporate group and transient business that stayed away due to higher rates and many booking restrictions.

Speaker #3: So the net room benefit came primarily from rate not occupancy. This also explains the slight June occupancy dip Ray mentioned. The change in mix from group to transient unfortunately also had a negative impact on food and beverage revenues in our match markets.

Jon Bortz: The change in mix from group to transient unfortunately also had a negative impact on food and beverage revenues in our match markets, particularly banquet and catering, which declined on a year-over-year basis and offset much of the room revenue gain. In total, we estimate the net benefit to hotel EBITDA from World Cup was between $500,000 and $1 million, a relatively minor benefit overall, but a benefit nonetheless. Turning back to the industry outlook, with a strong economy that remains resilient and with corporate profit growth at high levels and accelerating, there are fundamental reasons to be encouraged about positive industry trends continuing in H2 of this year. We remain concerned about potential negative impacts from the protracted and widening Middle East conflict, policy changes and geopolitical instability, and the real possibility of another potential government shutdown this fall.

Speaker #3: Particularly banquet and catering, which declined on a year-over-year basis, and offset much of the room revenue gain. In total, we estimate the net benefit to hotel EBITDA from World Cup was between $500,000 and $1 million.

Speaker #3: A relatively minor benefit overall, but a benefit nonetheless. Turning back to the industry outlook, with a strong economy that remains resilient, and with corporate profit growth at high levels and accelerating, there are fundamental reasons to be encouraged about positive industry trends continuing in the second half of this year.

Jon Bortz: Turning back to the industry outlook, with a strong economy that remains resilient and with corporate profit growth at high levels and accelerating, there are fundamental reasons to be encouraged about positive industry trends continuing in H2 of this year. We remain concerned about potential negative impacts from the protracted and widening Middle East conflict, policy changes and geopolitical instability, and the real possibility of another potential government shutdown this fall.

Speaker #3: However, we remain concerned about potential negative impacts from the protected and widening Middle East conflict policy changes and geopolitical instability, and the real possibility of another potential government shutdown this fall.

Speaker #3: Given the strong operating performance in Q2 and with July continuing that trend, we're increasing our industry rev par growth outlook to a range of 3.5 to 4.5 percent.

Jon Bortz: Given the strong operating performance in Q2 and with July continuing that trend, we're increasing our industry RevPAR growth outlook to a range of 3.5% to 4.5%. As we look out beyond this year, we believe we're at the beginning of a strong multi-year upcycle for the hotel industry. I think we can now confidently forecast that supply should remain very limited through most of the rest of this decade. We're at the beginning of a major multi-year capital investment cycle related to both AI and the reshoring of manufacturing, and we have another huge business investment cycle right behind this one with the creation and build-out of the robotics industry.

Speaker #3: As we look out beyond this year, we believe we're at the beginning of a strong multi-year upcycle for the hotel industry. I think we can now confidently forecast that supply should remain very limited through most of the rest of this decade.

Jon Bortz: I think we can now confidently forecast that supply should remain very limited through most of the rest of this decade. We're at the beginning of a major multi-year capital investment cycle related to both AI and the reshoring of manufacturing, and we have another huge business investment cycle right behind this one with the creation and build-out of the robotics industry.

Speaker #3: We're at the beginning of a major multi-year capital investment cycle related to both AI and the reshoring of manufacturing, and we have another huge business investment cycle right behind this one with the creation and build-out of the robotics industry.

Speaker #3: We also expect very significant and growing benefits from the massive wealth that has been created over the last 15 years for both investors and employees, and from the largest transfer of wealth in global history as the baby boomers begin to pass on the wealth they've amassed.

Jon Bortz: We also expect very significant and growing benefits from the massive wealth that has been created over the last 15 years for both investors and employees and from the largest transfer of wealth in global history as the baby boomers begin to pass on the wealth they've amassed. We believe the prospects for healthy multi-year demand growth have never been stronger or clearer in the last 30 years, nor has supply growth been so limited at the same time. These are incredibly positive multi-year fundamentals. The multi-year setup is very good, just like this year's setup was very good. Of course, a lot of things could still go wrong as they did last year. Before turning to our Q3 and updated full-year outlook, I want to spend a few minutes on why we're increasingly constructive about 2027 and the broader multi-year setup.

Speaker #3: We believe the prospects for healthy multi-year demand growth have never been stronger or clearer in the last 30 years, nor has supply growth been so limited at the same time.

Speaker #3: These are incredibly positive multi-year fundamentals. The multi-year setup is very good, just like this year's setup was very good. Of course, a lot of things could still go wrong, as they did last year.

Jon Bortz: The multi-year setup is very good, just like this year's setup was very good. Of course, a lot of things could still go wrong as they did last year. Before turning to our Q3 and updated full-year outlook, I want to spend a few minutes on why we're increasingly constructive about 2027 and the broader multi-year setup.

Speaker #3: Before turning to our Q3 and updated full-year outlook, I want to spend a few minutes on why we're increasingly constructive about 2027 and the broader multi-year setup.

Speaker #3: For 2027, we believe these strong demand and supply fundamentals should outweigh any headwinds related to difficult comparisons to this year's numbers. There are a number of reasons for this view.

Jon Bortz: For 2027, we believe these strong demand and supply fundamentals should outweigh any headwinds related to difficult comparisons to this year's numbers. There are a number of reasons for this view. First, we expect the economy to remain strong and potentially accelerate as business capital investments ramp further next year and corporate profit growth remains at high levels. Second, we believe the wealth effect will provide a growing positive impact on spending and travel. Third, while we have a strong holiday calendar this year, it's just as favorable in 2027. In addition, while the industry benefited meaningfully in June and early July from World Cup and America 250, we expect demand to materially outpace supply next year, which will drive occupancies higher, creating more compression and greater pricing power throughout 2027, which should more than offset the loss of this year's event-related benefits.

Speaker #3: First, we expect the economy to remain strong and potentially accelerate as business capital investments ramp further next year and corporate profit growth remains at high levels.

Speaker #3: Second, we believe the wealth effect will provide a growing positive impact on spending and travel. Third, while we have a strong holiday calendar this year, it's just as favorable in 2027.

Jon Bortz: Third, while we have a strong holiday calendar this year, it's just as favorable in 2027. In addition, while the industry benefited meaningfully in June and early July from World Cup and America 250, we expect demand to materially outpace supply next year, which will drive occupancies higher, creating more compression and greater pricing power throughout 2027, which should more than offset the loss of this year's event-related benefits.

Speaker #3: In addition, while the industry benefited meaningfully in June and early July from World Cup and America 250, we expect demand to materially outpace supply next year which will drive occupancies higher creating more compression and greater pricing power throughout 2027.

Speaker #3: Which should more than offset the loss of this year's event-related benefits. And finally, we ultimately expect the international inbound-outbound travel imbalance to reverse, and it could occur next year if the positive experiences foreign travelers had at the World Cup and traveling throughout the US and the very favorable media coverage of the World Cup activities translate as they normally do into increased future travel to the host country.

Jon Bortz: Finally, we ultimately expect the international inbound, outbound travel imbalance to reverse, and it could occur next year if the positive experiences foreign travelers had at the World Cup and traveling throughout the US, and the very favorable media coverage of the World Cup activities translate as they normally do into increased future travel to the host country. A more positive impression of the US compared to all the previous negative media about our country should help increase travel to the US from abroad. For Pebblebrook in 2027, we should continue to see significant growth from the recoveries in our urban markets, led by San Francisco and Los Angeles, coupled with more favorable convention calendars in San Diego and Boston that are expected to significantly improve the performance of those markets next year.

Speaker #3: A more positive impression of the U.S., compared to all the previous negative media about our country, should help increase travel to the U.S. from abroad.

Jon Bortz: A more positive impression of the US compared to all the previous negative media about our country should help increase travel to the US from abroad. For Pebblebrook in 2027, we should continue to see significant growth from the recoveries in our urban markets, led by San Francisco and Los Angeles, coupled with more favorable convention calendars in San Diego and Boston that are expected to significantly improve the performance of those markets next year.

Speaker #3: For Pebblebrook in 2027, we should continue to see significant growth from the recoveries in our urban markets led by San Francisco and Los Angeles, coupled with more favorable convention calendars in San Diego and Boston, that are expected to significantly improve the performance of those markets next year.

Speaker #3: We also have a number of significant events next year, including the Super Bowl moving from San Francisco to Los Angeles, the NCAA Men's Basketball Regional Finals in LA, the NFL Draft in Washington, D.C., the Star Wars 50th Anniversary Celebration in LA, the Major League Baseball All-Star Game in Chicago, and a significant amount of expected pre-Olympic travel into LA.

Jon Bortz: We also have a number of significant events next year, including the Super Bowl moving from San Francisco to Los Angeles, NCAA Men's Basketball Regional finals in LA, the NFL Draft in Washington, DC, the Star Wars 50th anniversary celebration in LA, the Major League Baseball All-Star Game in Chicago, and a significant amount of expected pre-Olympic travel into LA. We should also see further upside from our redeveloped properties as they gain additional share. Finally, our resorts should benefit from the ongoing K-shaped economy and the growing wealth of the higher-end consumer. While the Super Bowl won't be in San Francisco next year, we continue to expect strong RevPAR growth in the city as citywides continue to return, albeit at lower rates than the Super Bowl, and corporate transient travel should grow significantly at higher rates as corporate growth in San Francisco continues to boom.

Speaker #3: We should also see further upside from our redeveloped properties as they gain additional share. And finally, our resorts should benefit from the ongoing K-shaped economy and the growing wealth of the higher-end consumer.

Jon Bortz: Finally, our resorts should benefit from the ongoing K-shaped economy and the growing wealth of the higher-end consumer. While the Super Bowl won't be in San Francisco next year, we continue to expect strong RevPAR growth in the city as citywides continue to return, albeit at lower rates than the Super Bowl, and corporate transient travel should grow significantly at higher rates as corporate growth in San Francisco continues to boom.

Speaker #3: While the Super Bowl won't be in San Francisco next year, we continue to expect strong rev par growth in the city as citywides continue to return albeit at lower rates than the Super Bowl, and corporate transient travel should grow significantly at higher rates as corporate growth in San Francisco continues to boom.

Speaker #3: We also expect leisure travel to the impression of the city's environment has turned positive over the last year, and the city has been a showcase this year during major events.

Jon Bortz: We also expect leisure travel to see further increases as the impression of the city's environment has turned positive over the last year and the city has been a showcase this year during major events. Turning back to this year, Q3 is off to a great start with July proving to be stronger than we expected. Short-term pickup has surprised to the upside, and we think this indicates that summer vacation travel is starting strong, continuing the positive leisure trends from Q2. Having 4 July fall on a Saturday provided a big lift to our portfolio overall and probably a much bigger lift than the weekend-related America 250 events. Group pace for Q3 is also favorable. Corporate travel growth remains strong, and leisure travel is accelerating and allowing us to average higher prices through less discounting, fewer promotions, and reduced use of lower-priced wholesale channels.

Speaker #3: Turning back to this year, Q3 is off to a great start with July proving to be stronger than we expected. Short-term pickup has surprised to the upside, and we think this indicates that summer vacation travel is starting strong, continuing the positive leisure trends from Q2.

Jon Bortz: Short-term pickup has surprised to the upside, and we think this indicates that summer vacation travel is starting strong, continuing the positive leisure trends from Q2. Having 4 July fall on a Saturday provided a big lift to our portfolio overall and probably a much bigger lift than the weekend-related America 250 events. Group pace for Q3 is also favorable. Corporate travel growth remains strong, and leisure travel is accelerating and allowing us to average higher prices through less discounting, fewer promotions, and reduced use of lower-priced wholesale channels.

Speaker #3: Having July 4th fall on a Saturday provided a big lift to our portfolio overall and probably a much bigger lift than the weekend-related America 250 events.

Speaker #3: Group pays for the third quarter is also favorable. Corporate travel growth remains strong, and leisure travel is accelerating and allowing us to average higher prices through less discounting fewer promotions and reduced use of lower-priced wholesale channels.

Speaker #3: Based on preliminary results through the 25th, July rev par is on pace to grow between 7 and 8 percent over last year. However, we're not prepared to extrapolate July's unusually strong short-term pickup across the entire quarter.

Jon Bortz: Based on preliminary results through the 25th, July RevPAR is on pace to grow between 7% and 8% over last year. We're not prepared to extrapolate July's unusually strong short-term pickup across the entire quarter. Our Q3 range preserves a prudent allowance for shorter booking windows, potential macroeconomic and policy-related volatility, and the impact of geopolitical events. For Q3, our outlook assumes same-property RevPAR growth of 1% to 3%, same-property hotel EBITDA of $100.5 million to $104.5 million, adjusted EBITDA of $92.5 million to $96.5 million, and adjusted FFO per share of $0.48 to $0.52. When we look at our pace for the H2 of the year, as of the end of June, room revenues were pacing ahead of same time last year by 5.5%, which is a total of $10.7 million.

Speaker #3: Our Q3 range preserves a prudent allowance for shorter booking windows potential macroeconomic and policy-related volatility and the impact of geopolitical events. For Q3, our outlook assumes same property rev par growth of 1 to 3 percent, same property hotel EBITDA of 100.5 million dollars to 104.5 million dollars, adjusted EBITDA of 92.5 million dollars to 96.5 million dollars, and adjusted FFO per share of 48 to 52 cents.

Jon Bortz: For Q3, our outlook assumes same-property RevPAR growth of 1% to 3%, same-property hotel EBITDA of $100.5 million to $104.5 million, adjusted EBITDA of $92.5 million to $96.5 million, and adjusted FFO per share of $0.48 to $0.52. When we look at our pace for the H2 of the year, as of the end of June, room revenues were pacing ahead of same time last year by 5.5%, which is a total of $10.7 million.

Speaker #3: When we look at our pace for the second half of the year, as of the end of June, room revenues were pacing ahead of same time last year by 5.5 percent, which is a total of 10.7 million dollars.

Speaker #3: About 80 percent of this revenue pace advantage is being driven by transient with the remaining 20 percent in group. If pickup for the second half of the year equals last year's pickup, it would translate to rev par growth equal to roughly 2.4 percent in the second half.

Jon Bortz: About 80% of this revenue pace advantage is being driven by transient, with the remaining 20% in group. If pickup for the H2 of the year equals last year's pickup, it would translate to RevPAR growth equal to roughly 2.4% in the H2. To put these numbers in perspective, our current nominal pace advantage is in line with the high end of our implied RevPAR growth outlook for the H2 of the year. If pickup in the H2 runs ahead of last year, we would exceed our outlook by the higher pickup. Recall that last year, with everything that happened, we lost pace advantage as the year progressed and finished down for the year in room revenue. Speaking of our outlook, we're raising our full-year outlook to reflect the Q2 outperformance while maintaining our prior assumptions for the H2.

Speaker #3: To put these numbers in perspective, our current nominal pace advantage is in line with the high end of our implied RevPAR growth outlook for the second half of the year.

Speaker #3: So if pickup in the second half runs ahead of last year, then we would exceed our outlook by the higher pickup. Recall that last year, with everything that happened, we lost pace advantage as the year progressed and finished down for the year in room revenue.

Jon Bortz: If pickup in the H2 runs ahead of last year, we would exceed our outlook by the higher pickup. Recall that last year, with everything that happened, we lost pace advantage as the year progressed and finished down for the year in room revenue. Speaking of our outlook, we're raising our full-year outlook to reflect the Q2 outperformance while maintaining our prior assumptions for the H2.

Speaker #3: Speaking of our outlook, we're raising our full-year outlook to reflect the second quarter outperformance while maintaining our prior assumptions for the second half. With the increased outlook, we're now forecasting same property rev par growth for the year of 4.5 to 5.5 percent and increase of 125 basis points at the midpoint.

Jon Bortz: With the increased outlook, we're now forecasting same-property RevPAR growth for the year of 4.5% to 5.5%, an increase of 125 basis points at the midpoint. We're also forecasting same-property EBITDA growth of 8.2% to 10.5%, with the midpoint at 9.3%, a healthy increase for the year, and a material step-up from our prior outlook. These increases translate into an adjusted FFO outlook of $1.69 to $1.76 per diluted share, an increase of $0.08 at the midpoint, with a similar increase in our free cash flow outlook. As I indicated earlier, worth repeating, current trends remain favorable, booking windows remain short, and the geopolitical policy and macroeconomic environment remains uncertain. We're encouraged by the industry trends we've been seeing, we're not yet comfortable assuming visibility we don't yet have.

Speaker #3: We're also forecasting same property EBITDA growth of 8.2 percent to 10.5 percent with the midpoint at 9.3 percent, a healthy increase for the year and a material step up from our prior outlook.

Speaker #3: These increases translate into an adjusted FFO outlook of $1.69 to $1.76 per diluted share and increase of 8 cents at the midpoint with a similar increase in our free cash flow outlook.

Speaker #3: As I indicated earlier, but worth repeating, current trends remain favorable, but booking windows remain short and the geopolitical policy and macroeconomic environment remains uncertain.

Jon Bortz: As I indicated earlier, worth repeating, current trends remain favorable, booking windows remain short, and the geopolitical policy and macroeconomic environment remains uncertain. We're encouraged by the industry trends we've been seeing, we're not yet comfortable assuming visibility we don't yet have.

Speaker #3: We're encouraged by the industry trends we've been seeing but we're not yet comfortable assuming visibility we don't yet have. We'll continue to take the year one quarter at a time.

Jon Bortz: We'll continue to take the year one quarter at a time, if there's no material impact from geopolitical policy or other macroeconomic events, we should keep performing favorably to our outlook, just as we have in the H1. With a terrific H1 behind us and a positive setup in the H2, we remain very excited about the full year for Pebblebrook. Now, we just need the rest of the year to cooperate by providing a more stable environment. With that, we'd now be happy to take your questions. Christine, if you wouldn't mind, please proceed with the Q&A.

Speaker #3: And if there's no material impact from geopolitical policy or other macroeconomic events, then we should keep performing favorably to our outlook just as we have in the first half.

Speaker #3: With a terrific first half behind us and a positive setup in the second half, we remain very excited about the full year for Pebblebrook.

Speaker #3: Now we just need the rest of the year to cooperate by providing a more stable environment. So with that, we'd now be happy to take your questions.

Speaker #3: Christine, if you wouldn't mind, please proceed with the Q&A.

Speaker #2: Thank you. We will now be conducting a question and answer session. In fairness to all callers, we ask that your all questioners limit themselves to one question.

Operator 2: Thank you. We will now be conducting a question-and-answer session. In fairness to all callers, we ask that all questioners limit themselves to one question. If you have additional questions, you may re-queue, and those will be addressed, time permitting. If you would like to ask a question, please press *1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press *2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Duane Pfennigwerth with Evercore ISI. Please proceed with your question.

Operator: Thank you. We will now be conducting a question-and-answer session. In fairness to all callers, we ask that all questioners limit themselves to one question. If you have additional questions, you may re-queue, and those will be addressed, time permitting. If you would like to ask a question, please press *1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press *2 if you would like to remove your question from the queue.

Speaker #2: If you have additional questions, you may re-queue and those will be addressed, time permitting. If you would like to ask a question, please press star 1 on your telephone keypad.

Speaker #2: A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.

Speaker #2: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Duane Pfennigwerth with Evercore ISI. Please proceed with your question.

Speaker #2: Thank you. Our first question comes from the line of Dwayne Fenningworth with Evercore ISI. Please proceed with your question.

Speaker #1: Hey, thanks. For that and congrats on these results. I just wondered if you could speak a little bit more to the drivers of the better pickup that you have seen and you're continuing to see is that primarily leisure transient or are there other drivers to that better pickup which feels like the key assumption for the back half?

Duane Pfennigwerth: Hey, thanks for that, congrats on these results. I just wondered if you could speak a little bit more to the drivers of the better pickup that you have seen and you're continuing to see. Is that primarily leisure transient, or are there other drivers to that better pickup, which feels like the key assumption for H2?

Speaker #3: So thanks, Dwayne. The drivers have been fairly broad, but I'd say clearly led by the transient side. And it would be both corporate transient in terms of in the month, for the month, in the quarter for the quarter pickup.

Jon Bortz: Thanks, Duane. The drivers have been fairly broad, but I'd say clearly led by the transient side. It would be both corporate transient in terms of in the month, for the month, in the quarter, for the quarter pickup, and it would be leisure transient. From a demand side, those are the primary drivers. Group stability and group attendance and predictability in group attendance and spend are also positive. I think the other driver of potential revenue growth, which is what we've been seeing increasingly, and we saw it in Q2, and we saw it in resorts in San Francisco, is an ability to drive pricing higher through increased pricing, through increased premiums on premium rooms. No different than the airlines, as an example.

Speaker #3: And it would be leisure transient. And so from a demand side, those are the primary drivers. Group stability and group attendance and predictability and group attendance and spend are also positive.

Speaker #3: I think the other driver of potential revenue growth, which is what we've seen been seeing increasingly and we saw it in Q2 and we saw it in resorts in San Francisco, is an ability to drive pricing higher through increased pricing through increased premiums on premium rooms, no different than the airlines as an example.

Jon Bortz: I think the other driver of potential revenue growth, which is what we've been seeing increasingly, and we saw it in Q2, and we saw it in resorts in San Francisco, is an ability to drive pricing higher through increased pricing, through increased premiums on premium rooms. No different than the airlines, as an example.

Speaker #3: Through using less promotions and discounting and looking at our mix and using channels trying to drive business more through the higher rated channels and being less focused on some of the lower rated channels.

Jon Bortz: Through using less promotions and discounting, and looking at our mix and using channels, trying to drive business more through the higher-rated channels and being less focused on some of the lower-rated channels. It's fairly comprehensive in terms of what we've seen in the drivers and what we hope will continue in H2 of the year.

Speaker #3: So, it's fairly comprehensive in terms of what we've seen in the drivers, and what we hope will continue in the second half of the year.

Speaker #1: Thank you.

Duane Pfennigwerth: Thank you.

Speaker #2: Our next question comes from the line of Smeads Rose with City. Please proceed with your question.

Operator 2: Our next question comes from the line of Smedes Rose with Citi. Please proceed with your question.

Operator: Our next question comes from the line of Smedes Rose with Citi. Please proceed with your question.

Speaker #4: Hi, thank you. I was wondering you provided a lot of detail around the operating outlook which sounds relatively positive and I get that you're somewhat tempered.

Smedes Rose: Hi. Thank you. I was wondering, you provided a lot of detail around the operating outlook, which sounds relatively positive. I get that you're somewhat tempered. I was just wondering if you could speak to what you're seeing in the transactions market. It seems like it's kind of picking up from what we're hearing, curious as to what you guys are seeing.

Speaker #4: I was just wondering if you could speak to what you're seeing in the transactions market. Is that it seems like it's kind of picking up from what we're hearing but curious as to what you guys are seeing.

Speaker #3: Yeah, Smeads, this is

Jon Bortz: Yes, Maze, this is Tom. Listen, it continues to be more constructive. Obviously, we expected that in terms of the improving operating fundamentals. As we stated previously, capital follows performance. We're seeing more transactions. We're seeing larger transactions. We're seeing more investor depth. Performance is leading to more investor conviction. You have all of the ingredients. I think you have increasing operating fundamentals. You have more investor conviction. You have more trades, which I think is giving more confidence to other investors to participate. You have the debt markets that continue to remain attractive, both in terms of availability as well as pricing. I think overall, it's set up for a more active.

Thomas Fisher: Yes, Maze, this is Thomas Fisher. Listen, it continues to be more constructive. Obviously, we expected that in terms of the improving operating fundamentals. As we stated previously, capital follows performance. We're seeing more transactions. We're seeing larger transactions. We're seeing more investor depth. Performance is leading to more investor conviction. You have all of the ingredients.

Speaker #5: Tom. Listen, it continues to be more constructive. Obviously, we expected that in terms of the improving fund operating fundamentals. As we stated previously, capital follows performance.

Speaker #5: We're seeing more transactions. We're seeing larger transactions. We're seeing more investor depth and performance is leading to more investor conviction. So you have all of the ingredients.

Speaker #5: I think you have increasing operating fundamentals. You have more investor conviction. You have more trades which I think is giving more confidence to other investors to participate.

Thomas Fisher: I think you have increasing operating fundamentals. You have more investor conviction. You have more trades, which I think is giving more confidence to other investors to participate. You have the debt markets that continue to remain attractive, both in terms of availability as well as pricing. I think overall, it's set up for a more active.

Speaker #5: You have the debt markets that continue to remain attractive both in terms of availability as well as pricing. And so I think overall it's set up for a more active — although I would tell you that it's somewhat bifurcated, that it continues to kind of trend towards the luxury-type assets and the resort-type assets, and then assets where markets have significant growth that investors can underwrite.

Thomas Fisher: Although, I would tell you that it's somewhat bifurcated, that it continues to kind of trend towards the luxury-type assets and the resort-type assets, and then assets where markets have significant growth that investors can underwrite.

Speaker #4: Great. Thank you.

Smedes Rose: Great. Thank you.

Speaker #2: Our next question comes from the line of Gregory Miller with Truist. Please proceed with your question.

Operator 2: Our next question comes from the line of Gregory Miller with Truist. Please proceed with your question.

Operator: Our next question comes from the line of Gregory Miller with Truist. Please proceed with your question.

Speaker #1: Thank you, good morning. I'd like to ask about international inbound. As you discussed, the World Cup provided a lot of positive publicity for international audiences.

Gregory Miller: Thank you. Good morning. I'd like to ask about international inbound. As you discussed, the World Cup provided a lot of positive publicity for international audiences. Do you find that the local convention and visitors bureaus are taking advantage of this opportunity to promote their cities in a different way, given the goodwill?

Speaker #1: Do you find that the local convention and visitors bureaus are taking advantage of this opportunity to promote their cities in a different way, given the goodwill?

Speaker #3: Yeah, that's a good question, Greg. I mean, we've had a lot of conversations with folks like SF Travel, as an example, or the San Diego Authority.

Jon Bortz: That's a good question, Greg. We've had a lot of conversations with folks like SF Travel, as an example, or the San Diego Tourism Authority. We've seen them increasingly, as the years gone on, they have increasingly put more money into the international side and more effort into the international side, including sales trips that they've been making. I'll give you an example most recently. I think they were pretty hesitant at the beginning of the year. As we started to see the imbalance sort of flatten out as the year's gone on, then turn positive in June, like SF Travel has a fairly major marketing effort going on in Canada right now, with a view that maybe the Canadians are ready to come back. They love our country. They were here. Many of them were here for World Cup.

Speaker #3: And we've seen them increasingly, as the year has gone on, put more money into the international side and more effort into the international side, including sales trips that they've been making.

Speaker #3: And I'll give you an example. Most recently, and I think they were pretty hesitant at the beginning of the year and as we started to see the imbalance sort of flatten out as the year has gone on and then turned positive in June, like SF Travel has a fairly major marketing effort going on in Canada right now.

Jon Bortz: I think they were pretty hesitant at the beginning of the year. As we started to see the imbalance sort of flatten out as the year's gone on, then turn positive in June, like SF Travel has a fairly major marketing effort going on in Canada right now, with a view that maybe the Canadians are ready to come back. They love our country. They were here. Many of them were here for World Cup.

Speaker #3: And with a view that maybe the Canadians are ready to come back, they love our country, they were here many of them were here for World Cup, the Canadian team did well.

Thomas Fisher: The Canadian team did well, and they had a positive experience like other World Cup travelers. I think that word of mouth that goes back to those countries is viewed as a positive catalyst and a positive opportunity. We are seeing, I can't speak for all of them, but I know those two markets as an example, San Francisco and San Diego, are putting more time, effort, and money into wooing international inbound back to their markets.

Jon Bortz: The Canadian team did well, and they had a positive experience like other World Cup travelers. I think that word of mouth that goes back to those countries is viewed as a positive catalyst and a positive opportunity. We are seeing, I can't speak for all of them, but I know those two markets as an example, San Francisco and San Diego, are putting more time, effort, and money into wooing international inbound back to their markets.

Speaker #3: And they had a positive experience, like other World Cup travelers, and I think that word of mouth that goes back to those countries is viewed as a positive catalyst.

Speaker #3: And a positive opportunity. And so we are seeing I can't speak for all of them, but I know those two markets as an example San Francisco and San Diego are putting more time, effort, and money into wooing international inbound back to their markets.

Speaker #1: Great. Thank you, John.

Gregory Miller: Great. Thank you, Jon.

Speaker #2: Our next question comes from the line of Ari Klein with BMO Capital Markets. Please proceed with your question.

Operator 2: Our next question comes from the line of Ari Klein with BMO Capital Markets. Please proceed with your question.

Operator: Our next question comes from the line of Ari Klein with BMO Capital Markets. Please proceed with your question.

Ari Klein: Thanks, and good morning. I guess when we look at H1 RevPAR growth, what do you think the underlying growth is versus the 8.8% year-to-date that was reported if adjusted for the World Cup and maybe some of the other unique tailwinds like calendar shifts? Is that the right way to think about 2027 in that the events that we had this year versus next year kind of net each other out from a tailwind standpoint? Thank you.

Speaker #6: Thanks and good morning. I guess when we look at first half rep part growth, what do you think the underlying growth is versus the 8.8% year to date that was reported?

Speaker #6: If adjusted for the World Cup and maybe some of the other unique tailwinds like calendar shifts, is that the right way to think about 2027—in that the events that we had this year versus next year kind of net each other out from a tailwind standpoint?

Speaker #6: Thank you.

Speaker #5: Well, it's a great question and a tough question. Because as we've talked about historically, people don't always tell you why they're coming. And so I think what we've been seeing is a very broad-based increase in demand in all the segments except for international inbound, which again, perhaps finally improved a little bit in June.

Jon Bortz: Well, it's a great question and a tough question because as we've talked about historically, people don't always tell you why they're coming. I think what we've been seeing is a very broad-based increase in demand in all the segments except for international inbound, which again, perhaps finally improved a little bit in June. It seems like demand growth is tracking in the 1.5% to 2% range, I think from an underlying perspective on a year-over-year basis. Looking at the Q2 GDP report preliminary that came out this morning, it was right at 1.5%. I think as we've talked about in the past, I think demand growth is likely to track reasonably closely to GDP growth, and that's what we've been seeing so far this year.

Speaker #5: It seems like demand growth is tracking in the 1.5% to 2% range, I think, from an underlying perspective, on a year-over-year basis.

Jon Bortz: It seems like demand growth is tracking in the 1.5% to 2% range, I think from an underlying perspective on a year-over-year basis. Looking at the Q2 GDP report preliminary that came out this morning, it was right at 1.5%. I think as we've talked about in the past, I think demand growth is likely to track reasonably closely to GDP growth, and that's what we've been seeing so far this year.

Speaker #5: And looking at the Q2 GDP report preliminary that came out this morning, it was right at one and a half percent. And so I think as we've talked about in the past, I think demand growth is likely to track reasonably closely to GDP growth.

Speaker #5: And that's what we've been seeing so far this year. I think that what changes in these kinds of up cycles is what happens with rate.

Thomas Fisher: I think that what changes in these kinds of up cycles is what happens with rate. I think what we were talking about in the call was that the increased rate that came through World Cup is likely to be more than offset by increasing rate as a result of improving overall industry fundamentals and our own improving fundamentals within our portfolio. I think some of that is

Jon Bortz: I think that what changes in these kinds of up cycles is what happens with rate. I think what we were talking about in the call was that the increased rate that came through World Cup is likely to be more than offset by increasing rate as a result of improving overall industry fundamentals and our own improving fundamentals within our portfolio. I think some of that is

Speaker #5: And I think what we were talking about in the call was that the increased rate that came through World Cup is likely to be more than offset by increasing rate as a result of improving overall industry fundamentals and our own improving fundamentals within our portfolio.

Speaker #5: I think some of that is comes from the competitive framework. When the pie is getting bigger, it's easier to price with more confidence. You don't have to worry about if the only way to grow is to take business from my competitor, which is the environment we've been living in the last two to three years.

Jon Bortz: comes from the competitive framework. When the pie is getting bigger, it's easier to price with more confidence. You don't have to worry about if the only way to grow is to take business from my competitor, which is the environment we've been living in the last 2 to 3 years. It does take time for that confidence level to improve, and that's what we've started to see. I think from an underlying demand perspective, I think it's going to continue to track GDP. We know where supply is going to be. It's going to be well south of 1%, and right now it's running less than 0.5% on a net basis. I think that's the fundamental setup that's good. What will vary is how quickly do we increase confidence? How quickly do the compression nights increase?

Speaker #5: And it does take time for that confidence level to improve. And that's what we've started to see. So I think from an underlying demand perspective, I think it's going to continue to track GDP.

Jon Bortz: I think from an underlying demand perspective, I think it's going to continue to track GDP. We know where supply is going to be. It's going to be well south of 1%, and right now it's running less than 0.5% on a net basis. I think that's the fundamental setup that's good. What will vary is how quickly do we increase confidence? How quickly do the compression nights increase?

Speaker #5: We know where supply is going to be. I mean, it's going to be well south of 1%. And right now, it's running at less than half a percent on a net basis.

Speaker #5: So I think that's the fundamental setup that's good. And what will vary is how quickly do we increase confidence, how quickly do the compression nights increase.

Speaker #5: That'll vary by market, based upon what's going on in any individual market. And how does it change the behavior in terms of the mix that we have—shifting that mix from discounted channels, which we went deep into to build occupancy in the last few years, and coming out of that and pushing less of that, and pushing more of the higher-rated channels.

Jon Bortz: That'll vary by market based upon what's going on in any individual market. How does it change the behavior in terms of the mix that we have, shifting that mix from discounted channels, which we went deep into to build occupancy in the last few years, and coming out of that and pushing less of that and pushing more of the higher-rated channels. Ray, I don't know if you have anything to add to that, but that's kind of the way we think about what's going on.

Speaker #5: So Ray, I don't know if you have anything to add to that, but that's kind of the way we think about what's going on.

Speaker #7: And Ari, clearly, there are a lot of benefits this year and look, our portfolio benefited from the Super Bowl and San Francisco, which we talked about.

Raymond Martz: Ari, clearly, there are a lot of benefits this year. Look, our portfolio benefited from the Super Bowl in San Francisco, which we talked about, but we also had some headwinds this year. Take San Diego. San Diego, year to date, RevPAR is negative. That's because of a very weak convention calendar. We have 120,000 less convention room nights in San Diego year to date than we did last year. That reverses in 2027, and Boston also improves. Although we have some benefits from some of the calendar items, we also had a bunch of headwinds. I know right now World Cup is getting a lot of attention with the demand, and it's certainly helped some of the markets in the US and helped US as a whole. We talked about it's more marginal.

Speaker #7: But we also had some headwinds this year. Take San Diego. San Diego year-to-date, RevPAR is negative. And that's because of a very weak convention calendar.

Speaker #7: We have 120,000 less convention room nights in San Diego year to date than we did last year. But that reverses in '27. And Boston also improves.

Speaker #7: So although we have some benefits from some of the calendar items, we also had a bunch of headwinds. I know right now World Cup is getting a lot of attention with the demand and it's certainly helped some of the markets in the US and helped US as a whole.

Raymond Martz: Although we have some benefits from some of the calendar items, we also had a bunch of headwinds. I know right now World Cup is getting a lot of attention with the demand, and it's certainly helped some of the markets in the US and helped US as a whole. We talked about it's more marginal.

Speaker #7: We talked about it being more marginal. But as we get into talking about '27 and the setup, we feel really good because some of these headwinds will turn into tailwinds for us in several of our markets.

Raymond Martz: As we get into talk about 2027 and the setup, we feel really good because some of these headwinds will turn to tailwinds for us in several of our markets.

Speaker #6: Thank you.

[Analyst]: Thank you.

Ari Klein: Thank you.

Speaker #3: Thanks, Ari.

[Company Representative] (Pebblebrook Hotel Trust): Thanks, Ari.

Raymond Martz: Thanks, Ari.

Speaker #2: Our next question comes from the line of Rich Hightower with Barclays. Please proceed with your question.

Operator 2: Our next question comes to the line of Rich Hightower with Barclays. Please proceed with your question.

Operator: Our next question comes to the line of Rich Hightower with Barclays. Please proceed with your question.

Speaker #8: Hi, good morning, guys. I want to dig into the kind of upside from redevelopments and some of the resort properties that are still on the path to recovery.

Rich Hightower: Hey, good morning, guys. I want to dig into the upside from redevelopments and some of the resort properties that are still on the path to recovery. I didn't get a chance to compare the before and after between the latest investor deck and what came before. Does anything about Q2's strength and what's still very clearly optimism about the second half and beyond, did that change the underlying recovery trajectory from recent redevelopments? How much of that recovery path is predicated on macro and basic demand drivers versus, let's say, property-level execution? Thanks.

Speaker #8: So I didn't get a chance to compare sort of the before and after between the latest investor deck and what came before.

Speaker #8: But does anything about sort of QQ's strength and what's still very clearly optimism about the second half and beyond, did that change the underlying sort of recovery trajectory from recent redevelopments?

Speaker #8: And then how much of that recovery path is predicated on macro and kind of basic demand drivers versus, let's say, property level execution? Thanks.

Speaker #5: Sure. So, I think the benefit that we saw from less sensitivity to price increases in the second quarter applied pretty much throughout the portfolio.

Jon Bortz: Sure. I think the benefit that we saw from less sensitivity to price increases in Q2 applied pretty much throughout the portfolio, and our redeveloped properties were able to take advantage of that. Part of the upside that has remained in those properties comes from both rate and occupancy share gain. We're seeing them, particularly Newport, Estancia, as examples, continuing to increase their share in the market. Not to a stabilized place yet, it's always easier to gain share when things are good, Rich, than when it's difficult. No different than the conversation, the discussion I was just having about when the pie is getting bigger, it's always easier to increase pricing. I don't know that the pace of the gain has accelerated in a material way in terms of recovery of the next $4 to $6 million of redevelopment.

Speaker #5: And our redeveloped properties were able to take advantage of that. And part of the upside that has remained in those properties comes from both rate and occupancy share gain.

Speaker #5: And so we're seeing them particularly Newport, Estancia, as examples, continuing to increase their share in the market, not to a stabilized place yet, but they're certainly it's always easier to gain share when things are good, Rich.

Jon Bortz: We're seeing them, particularly Newport, Estancia, as examples, continuing to increase their share in the market. Not to a stabilized place yet, it's always easier to gain share when things are good, Rich, than when it's difficult. No different than the conversation, the discussion I was just having about when the pie is getting bigger, it's always easier to increase pricing. I don't know that the pace of the gain has accelerated in a material way in terms of recovery of the next $4 to $6 million of redevelopment.

Speaker #5: Than when it's difficult. No different than the conversation the discussion I was just having about when the pie is getting bigger, it's always easier to increase pricing.

Speaker #5: And so I don't know that the pace of the gain has accelerated in a material way in terms of the recovery of the next four to six million of redevelopment.

Speaker #5: But I do think we were encouraged by what we saw in the second quarter throughout all of the resorts, and that would include the properties that we redeveloped.

Jon Bortz: I do think we were encouraged by what we saw in Q2 throughout all of the resorts, and that would include the properties that we redeveloped. We're very encouraged by the progress they're making, where, as you know, outside of the redevelopments, the bridge that we laid out really doesn't include increases in performance at the resort level. It wasn't meant to say resorts wouldn't improve. It meant to say that's going to be more macro related. I think overall, back to your question of execution, we always have varying levels of execution within our portfolio. We highlighted some challenges in DC in our properties there with leadership changes that have happened. As it relates to the resorts, execution does matter. We have great execution right now going on at most of the properties, particularly Newport and Estancia.

Speaker #5: So we're very encouraged by the progress they're making. We're, as you know, outside of the redevelopments, the bridge that we laid out really doesn't include increases in performance at the resort level.

Speaker #5: And it wasn't meant to. It wasn't meant to say resorts wouldn't improve. It meant to say that's going to be more macro related. And I think overall, back to your question of execution, we always have varying levels of execution.

Jon Bortz: I think overall, back to your question of execution, we always have varying levels of execution within our portfolio. We highlighted some challenges in DC in our properties there with leadership changes that have happened. As it relates to the resorts, execution does matter. We have great execution right now going on at most of the properties, particularly Newport and Estancia.

Speaker #5: Within our portfolio, we highlighted some challenges in DC in our properties there with leadership changes that have happened. And as it relates to the resorts, I mean, execution does matter.

Speaker #5: We have great execution right now going on at most of the properties, particularly Newport and Estancia. Within the portfolio, and we still have work to do at Jekyll Island even though we're encouraged by the pace of further out group bookings at that property.

Jon Bortz: Within the portfolio, we still have work to do at Jekyll Island, even though we're encouraged by the pace of further out group bookings at that property.

Raymond Martz: Rich, this provides more context, which I'm sure you look at post-earning season when your life gets a little more manageable here. We talked about Estancia and Newport because those are the most recent redevelopments, and that's on track for those projects getting their ROIs, and we identified $6 million of upside from those projects. Just as a reminder, the projects that we started back in 2018, 2019, which these things are multi-year, this is where we invested $270 million of capital. We've generated over $40 million of ROI from those projects. We just want to make sure I underscore that these are real achievements that we're gaining. That's why we are, even as grown, and as Jon pointed out, what we really don't include is really the further upside we're experiencing in our resorts. That, again, led the portfolio this quarter.

Speaker #7: And Rich, this provides a more context, which I'm sure you look at post earnings season when you're life gets a little more manageable here.

Speaker #7: But we talked about Estancia and Newport because those are the most recent redevelopments, and that’s on track for those projects getting their ROIs. And we still have—we identified $6 million of upside from those projects.

Speaker #7: But just as a reminder, the projects that we started back in 2018, 2019, which these things are multi-year, this is where we invested a $270 million of capital.

Raymond Martz: Just as a reminder, the projects that we started back in 2018, 2019, which these things are multi-year, this is where we invested $270 million of capital. We've generated over $40 million of ROI from those projects. We just want to make sure I underscore that these are real achievements that we're gaining. That's why we are, even as grown, and as Jon pointed out, what we really don't include is really the further upside we're experiencing in our resorts. That, again, led the portfolio this quarter.

Speaker #7: We've generated over $40 million of ROI from those projects, so we just want to make sure to underscore that these are real achievements that we're gaining.

Speaker #7: That's why we are even as grown as John pointed out, what we really don't include is really the further upside we're experiencing in our resorts.

Speaker #7: Look, that again led the portfolio this quarter. We're really excited about it. So we provide a lot of good detail and presentation, encourage you to look at it.

Raymond Martz: We're really excited about it. We provide a lot of good detail and presentation, encourage you to look at it. We feel confident about it, and the results have proven itself.

Speaker #7: We feel confident about it. And we've the results have proven itself.

Speaker #8: All right. Thanks, guys.

Rich Hightower: All right. Thanks, guys.

Speaker #3: Thank you.

Raymond Martz: Thank you.

Speaker #2: Our next question comes from the line of RJ Milligan with Raymond James. Please proceed with your question.

Operator 2: Our next question comes from the line of R.J. Milligan with Raymond James. Please proceed with your question.

Operator: Our next question comes from the line of R.J. Milligan with Raymond James. Please proceed with your question.

Speaker #9: Hey, good morning, guys. So along the same lines as some of the questions that have already been asked, but Jon, obviously a good problem to have.

RJ Milligan: Hey, good morning, guys. Along the same lines as some of the questions that have already been asked, but Jon, obviously a good problem to have. You mentioned difficult comps for next year. You highlighted some of the drivers for RevPAR growth in 2027 for the industry, and then some specific drivers for Pebblebrook. I think you guys are trending about 300 basis points ahead of the industry in terms of RevPAR growth so far this year. Given the puts and takes for Pebblebrook next year and the difficult comps, how do you expect that spread to trend in 2027?

Speaker #9: You mentioned difficult comps for next year. You highlighted some of the drivers for Red Park growth in 2027 for the industry. And then some specific drivers for Pebblebrook.

Speaker #9: I think you guys are trending about 300 basis points ahead of the industry in terms of Red Park growth so far this year. Given the puts and takes for Pebblebrook, next year and the difficult comps, how do you expect that spread to trend in '27?

Speaker #5: Yeah. Well, another good question and another difficult one. Look, the 300 is not a long-term achievable spread. And historically, I think we've run anywhere from 50 to 100 basis points better than the industry overall.

Jon Bortz: Well, another good question and another difficult one. Look, the 300 is not a long-term achievable spread, and historically, I think we've run anywhere from 50 to 100 basis points better than the industry overall. I think early on, we tend to do better for a number of reasons. Sometimes the markets we've been in have been hit harder, like this one. The recovery in San Francisco, the recovery in LA, and the recoveries in Portland and Chicago examples, they're coming from very low levels, so there's a lot to regain in those markets. The fires, God, let's hope we don't have more of them, although it seems to be an increasing issue around the world. We see what's going on in Europe, some of the fires going on in the Midwest here. Fortunately, we're not seeing that in Southern California at this point in time.

Speaker #5: And I think the early on, we tend to do better. For a number of reasons, sometimes the markets we've been in have been hit harder.

Speaker #5: Like this one. So the recovery in San Francisco, the recovery in L.A., and the recoveries in Portland and Chicago, for example, they're coming from very low levels.

Jon Bortz: The recovery in San Francisco, the recovery in LA, and the recoveries in Portland and Chicago examples, they're coming from very low levels, so there's a lot to regain in those markets. The fires, God, let's hope we don't have more of them, although it seems to be an increasing issue around the world. We see what's going on in Europe, some of the fires going on in the Midwest here. Fortunately, we're not seeing that in Southern California at this point in time.

Speaker #5: So there's a lot to regain in those markets. The fires God, let's hope we don't have more of them, although it seems to be an increasing issue around the world.

Speaker #5: We see what's going on in Europe. Some of the fires going on in the Midwest here—fortunately, we're not seeing that in Southern California at this point in time.

Speaker #5: But it's going to be a future part of life. But that's an easy comparison for the first half for LA, and that's part of that higher 300 basis points than maybe what's normal on a go-forward basis.

Jon Bortz: It's going to be a future part of life. That's an easy comparison for the H1 for LA, and that's part of that higher 300 basis points than maybe what's normal on a go-forward basis. I do think we should run 50 to 100 basis points higher. I think having Super Bowl in LA in 2027 will be helpful. Actually, there's a lot of things going on in LA next year, fortunately, which should help with the recovery there. Then, of course, we have the Olympics in 2028, which should be a very major lift in that market. Then in 2029, we're going to have a little bit of a hangover from LA. We don't have a clear enough view into all of our other markets into 2029 right now to see if they would offset that.

Speaker #5: So I do think we should run 50 to 100 basis points higher. I think having Super Bowl in LA in be helpful. And actually, there's a lot of things going on in LA next year, fortunately, which should help with the recovery there.

Jon Bortz: Actually, there's a lot of things going on in LA next year, fortunately, which should help with the recovery there. Then, of course, we have the Olympics in 2028, which should be a very major lift in that market. Then in 2029, we're going to have a little bit of a hangover from LA. We don't have a clear enough view into all of our other markets into 2029 right now to see if they would offset that.

Speaker #5: And then, of course, we have the Olympics in '28, which should be a very major lift in that market. And then in '29, we're going to have a little bit of a hangover from LA.

Speaker #5: And we don't have a clear enough view into all of our other markets into '29 right now to see if they would offset that.

Speaker #5: But that's where I would say that the Olympics will be a more difficult one, in terms of comparison, to overcome.

Jon Bortz: That's where I would say the Olympics will be a more difficult one in terms of comparisons to overcome.

Speaker #9: Okay.

RJ Milligan: Okay.

Speaker #2: Our next question comes from the line of Jamie Feldman with Wells Fargo. Please proceed with your question.

Operator 2: Our next question comes from the line of Jamie Feldman with Wells Fargo. Please proceed with your question.

Operator: Our next question comes from the line of Jamie Feldman with Wells Fargo. Please proceed with your question.

Speaker #10: Great. Thanks for taking the question. So you achieve RevPAR about 350 basis points above the high end of your guide in Q2, but expenses were still within your original guidance range for the quarter.

Jamie Feldman: Great. Thanks for taking the question. You achieved RevPAR about 350 basis points above the high end of your guide in Q2, but expenses were still within your original guidance range for the quarter. Can you talk about how you were able to achieve that favorable flow-through and how we should be thinking about further expense improvements into H2?

Speaker #10: Can you talk about how you were able to achieve that favorable flow through and how we should be thinking about further expense improvements into the back half of the year?

Speaker #7: Sure, Jamie. Well, it's something we're really proud of—our hotel teams and our asset managers. I know we talk about it each quarter.

Raymond Martz: Sure, Jamie. Well, it's something we're really proud of, our hotel teams and our asset managers. I know we talk about it each quarter, and it's not just talk, it's results. We're excited the fact that we're able to keep these expenses at much lower levels. It's multiples. Through our efficiency studies, we are fewer FTEs on a per occupied room basis than we did pre-COVID. There's a lot of factors there. We're using technology more. We're using other areas that it's running better. That's how we're able to have our per occupied cost growing less than inflation at 2%. Then we'll start getting the additional benefits on savings like property insurance and other areas. You shouldn't assume that we're going to have that same expense growth each quarter.

Speaker #7: And it's not just talk, it's results. We're excited about the fact that we're able to keep these expenses at much lower levels. It's multiples. We flew our efficiency studies.

Speaker #7: We are fewer FTEs on a per-occupied room basis than we did pre-COVID. There's a lot of factors there. We're using technology more. We're using other areas that certainly better.

Speaker #7: So that's how we're able to have our per-occupied cost growing less than inflation, at 2%. And then, look, we'll start getting the additional benefits on savings like property insurance and in other areas.

Raymond Martz: That's how we're able to have our per occupied cost growing less than inflation at 2%. Then we'll start getting the additional benefits on savings like property insurance and other areas. You shouldn't assume that we're going to have that same expense growth each quarter.

Speaker #7: So you shouldn't assume that we're going to have that same expense growth each quarter. There are all sorts of other factors that could come into play, but we feel good about it.

Raymond Martz: There's all other factors that could go on, but we feel good about it, and it does show that at these even lower revenue growth levels, we're still able to push margins and expand. We feel that this is multi-year. We're just scratching the surface in a lot of these initiatives, and we feel good about it. Again, we thank our hotel teams and our asset managers. They're doing a heck of a job finding more efficiencies every day.

Speaker #7: And it does show that at these even lower revenue growth levels, we're still able to push margins and expand. So we feel that this is multi-year.

Speaker #7: We're just scratching the surface in a lot of these initiatives. And we feel good about it. But again, we think our hotel teams and our asset managers are doing a heck of a job finding more efficiencies every day.

Speaker #10: Thank you.

Jamie Feldman: Thank you.

Speaker #3: Thanks, Jamie.

Jon Bortz: Thanks, Jamie.

Speaker #2: Our next question comes from the line of Flores Van Dykum with Lattenberg Dahlman. Please proceed with your question.

Operator 2: Our next question comes from the line of Floris van Dijkum with Ladenburg Thalmann. Please proceed with your question.

Operator: Our next question comes from the line of Floris van Dijkum with Ladenburg Thalmann. Please proceed with your question.

Speaker #9: Hey, guys. Morning. John, you mentioned something about reducing Pebblebrook's reliance on discounted channels—presumably you're talking about OTAs. Maybe you could just remind us what the historical percentage of your demand came from OTAs and where that is now.

Floris van Dijkum: Hey guys, morning. Jon, you mentioned something about reducing Pebblebrook's reliance on discounted channels. Presumably, you're talking about OTAs. Maybe if you could just remind us what the historical percentage of your demand came from OTAs, where that is now, and is there a difference in urban versus resorts in terms of the reliance on OTAs? I'm thinking in particular, you've got this massive potential upside in occupancy ramps still in urban. I would imagine you probably are maybe more reliant on OTAs to help fill that. If you can give us a little bit of color on that'd be great.

Speaker #9: And is there a difference in urban versus resorts in terms of the reliance on OTAs? I'm thinking in particular, you've got this massive potential upside in occupancy ramps still in urban.

Speaker #9: I would imagine you probably are maybe more reliant on OTAs to help fill that, but if you can give us a little bit of color on that, that'd be great.

Speaker #5: Sure. I'm going to talk in general. Ray, I'll leave Ray to talk about the OTA percentages. But I think in general, when we talk about fewer discount channels, it goes well beyond the OTAs.

Jon Bortz: Sure. I'm going to talk in general, Ray. I'll leave Ray to talk about the OTA percentages. I think in general, when we talk about fewer discount channels, it goes well beyond the OTAs. It has to do with wholesale channels that we use, where you're giving them a lower, I'd say highly discounted rate, maybe up to 25% or 30%, and they're filling it with small to medium-sized tour groups, as an example, through wholesale channels. It involves some other channels, crew in many cases, not all cases is it lower rated, but in some cases it can be very low rated. We tend to pick crew up in a down cycle, and we tend to slowly reduce our crew as the cycle improves and the other demand channels pick up. Those would be some other areas.

Speaker #5: It has to do with wholesale channels that we use. Where you're selling where you're giving them a lower I'd say highly discounted rate, maybe up to 25 or 30%.

Speaker #5: And they're filling it with small to medium-sized tour groups as an example. Through wholesale channels. And it involves some other channels, crew in many cases, not all cases is it lower rated, but in some cases, it can be very low rated.

Jon Bortz: It involves some other channels, crew in many cases, not all cases is it lower rated, but in some cases it can be very low rated. We tend to pick crew up in a down cycle, and we tend to slowly reduce our crew as the cycle improves and the other demand channels pick up. Those would be some other areas.

Speaker #5: We tend to pick crew up in a down cycle, and we tend to slowly reduce our crew as the cycle improves and the other demand channels pick up.

Speaker #5: So those would be some other areas. And then as it relates to resort and urban, we tend to do more discounting and OTA use at our urban properties than we do our independent urban properties in particular than we do at our independent resorts.

Jon Bortz: As it relates to resort and urban, we tend to do more discounting and OTA use at our urban properties than we do our independent urban properties in particular, than we do at our independent resorts. Ray, if you want to talk about the general numbers.

Speaker #5: But Ray, if you want to talk about the general numbers.

Speaker #7: Yeah. Yeah. So, Flores, on a general basis, in our transient side, we have about 25% of our mix here that comes from OTAs. With our brands, that's lower.

Raymond Martz: Yeah. For us, on a general basis in our transient side, we have about 25% of our mix here comes from the OTAs. With our brands, that's lower, about 12% to 13%. Our urban lifestyle hotels, that's in about, call it about the 20% to 30% level. Our resorts are in the 20% to 23% level. It's a lower level there because the resorts tend to be a little more of a unique buying experience. People rely less on the OTAs, and actually, we have a high number of direct bookings for the resort side because of the premium resorts and experiences. We'll continue to push that, whether it's technology and looking at that. I know there's a lot of efforts going on there between all the LOMs and making our hotels appear better, which our teams are working on.

Speaker #7: About 12 to 13 percent. Our urban lifestyle hotels—that's in about, call it, the 28 to 30 percent level. And then our resorts are in the 20 to 23 percent level.

Speaker #7: So it's a lower level there. Because the resorts tend to be a little more unique buying experience. People rely less on the OTAs. And actually, we have a high number of direct bookings for the resort side because of the premium resorts and experiences.

Raymond Martz: People rely less on the OTAs, and actually, we have a high number of direct bookings for the resort side because of the premium resorts and experiences. We'll continue to push that, whether it's technology and looking at that. I know there's a lot of efforts going on there between all the LOMs and making our hotels appear better, which our teams are working on.

Speaker #7: So we'll continue to push that with whether it's technology and looking at that. I know there's a lot of efforts going on there between all the LLMs and making our hotels appear better, which our teams are working on.

Speaker #7: But it's something we manage, and all of our teams do. But just to be clear, all OTA business isn't negative. OTA business, positioned in a proper manner and at the proper time, can be a benefit.

Raymond Martz: It's something we manage and all of our teams do. Just to be clear, all OTA business isn't negative. OTA business positioned in a proper manner and proper time can be a benefit. It's just when a hotel team relies too much on the OTAs and not go out and find the direct business or other channels, that's when it's more of a challenge. You really have to take each property on a case-by-case basis and not say any OTA business is negative. I know that maybe brands have a different perspective of that because of their focus. For us, we're about what's the net RevPAR and business being generated, and OTAs are part of the mix.

Speaker #7: It's just when a hotel team relies too much on the OTAs and does not go out and find the direct business or other channels, that's when it's more of a challenge.

Speaker #7: So you really have to take each property on a case-by-case basis and not say any OTA business is negative. I know that maybe brands have a different perspective of that because of their focus.

Speaker #7: But for us, we're about what's the net repar and business being generated and OTAs are part of the mix.

Speaker #9: Thanks.

Floris van Dijkum: Thanks.

Speaker #2: Our next question comes from the line of Chris Darling with Green Street. Please proceed with your question.

Operator 2: Our next question comes from the line of Chris Darling with Green Street. Please proceed with your question.

Operator: Our next question comes from the line of Chris Darling with Green Street. Please proceed with your question.

Speaker #8: Hey, thank you. Good morning. Jon, I hope you could elaborate on your broad capital allocation priorities, given the meaningful run-up in your share price this year.

Chris Darling: Hey, thank you. Good morning. Jon, hopefully you could elaborate on just your broad capital allocation priorities, given the meaningful run-up in your share price this year. I appreciate you still traded a discount relative to the internal estimate of NAV, but that gap has narrowed pretty substantially. Just wondering if your thinking may have evolved.

Speaker #8: I appreciate you still traded a discount relative to the internal estimate of NAV, but that gap has narrowed pretty substantially. So just wondering if you're thinking may have evolved.

Speaker #7: Sure. Well, our capital

Jon Bortz: Sure. Well, our capital allocation strategy is focused on two things. It's creating value for the shareholders and driving growth in cash flow per share. Presumably, those two are linked over the long term. While the arbitrage opportunity has clearly, for the moment, gone down, the way we look at it is there continues to be a significant discount as we sell assets within the NAV range, and we have continued to do that using those proceeds opportunistically at the right time to buy our stock back, to buy our preferred securities back at a material discount, to pay down debt related to the EBITDA that we're selling. I think those all continue to be the best use of our capital.

Speaker #5: allocation strategy is focused on two things. It's creating value for the shareholders and driving growth in cash flow per share. Presumably, those two are linked over the long term.

Speaker #5: So, while the arbitrage opportunity has clearly, for the moment, gone down, the way we look at it is there continues to be a significant discount as we sell assets within the NAV range, and we have continued to do that.

Jon Bortz: While the arbitrage opportunity has clearly, for the moment, gone down, the way we look at it is there continues to be a significant discount as we sell assets within the NAV range, and we have continued to do that using those proceeds opportunistically at the right time to buy our stock back, to buy our preferred securities back at a material discount, to pay down debt related to the EBITDA that we're selling. I think those all continue to be the best use of our capital.

Speaker #5: Using those proceeds opportunistically at the right time to buy our stock back, to buy our preferred securities back at a material discount, to pay down debt related to the EBITDA.

Speaker #5: The assets we're selling, I think those all continue to be the best use of our capital. I don't think we're ready, prepared, or frankly, it's not the right use of capital to be out buying new assets, because we can buy our existing assets at a much more significant discount than the market values.

Jon Bortz: I don't think we're ready, prepared, or frankly it's not the right use of capital to be out buying new assets because we can buy our existing assets at a much more significant discount than the market values. While the arbitrage opportunity has shrunk for now, keep in mind that NAV, as an example, it's not static. As operating performance improves, we would expect these values to go up over time, and then we'll see how the stock performs. As we all know, the stocks tend to be on a kind of a random walk in the near term. I don't think our allocation strategies have changed at all. We have to sharpen our pencils because the arbitrage opportunity is not as significant as it was a few months ago.

Speaker #5: So while the arbitrage opportunity has shrunk for now, keep in mind that NAV as an example, it's not static. As operating performance improves, we would expect these values to go up over time.

Jon Bortz: As operating performance improves, we would expect these values to go up over time, and then we'll see how the stock performs. As we all know, the stocks tend to be on a kind of a random walk in the near term. I don't think our allocation strategies have changed at all. We have to sharpen our pencils because the arbitrage opportunity is not as significant as it was a few months ago.

Speaker #5: And then we'll see how the stock performs, and as we all know, these stocks tend to be on a kind of random walk in the near term.

Speaker #5: So I don't think our allocation strategies have changed at all. But we have to sharpen our pencils because the arbitrage opportunity is not as significant as it was a few months ago.

Speaker #8: Understood. Thank you for your time.

Chris Darling: Understood. Thank you for the time.

Speaker #5: Yeah. Thank you, Chris.

Jon Bortz: Yeah. Thank you, Chris.

Speaker #2: Our next question comes from the line of Jack Armstrong with Wells Fargo. Please proceed with your question.

Operator 2: Our next question comes from the line of Jack Armstrong with Wells Fargo. Please proceed with your question.

Operator: Our next question comes from the line of Jack Armstrong with Wells Fargo. Please proceed with your question.

Speaker #3: Hey, good morning. And thanks for taking the follow-up from our team. Can you take us through some of the moving pieces that brought you to Raymond?

Jack Armstrong: Hey, good morning, and thanks for taking the follow-up from our team. Can you take us through some of the moving pieces that brought you to raise your NAV estimate and spend some time talking about how closing the discount to your NAV is changing the way you're thinking about allocating incremental capital once we get through the convert in December?

Speaker #3: Is your NAV estimate and spend some time talking about how closing the discounts in your NAV is changing the way you're thinking about allocating incremental capital once we get through the convert in December?

Speaker #7: Sure. Sure, Jack. Yes, we update our NAV presentation. The overall gross value did not change. But some individual markets did. For example, resorts went up just because what we're seeing in the transaction market, as Tom alluded to earlier, is very constructive.

Raymond Martz: Sure, Jack. Yes, we updated our NAV presentation. The overall gross value did not change. Some individual markets did, for example, resorts went up just because what we're seeing in the transaction market, as Tom alluded to earlier, is very constructive and pricing continues to be healthy there. We took down a couple.

Raymond Martz: Sure, Jack. Yes, we updated our NAV presentation. The overall gross value did not change. Some individual markets did, for example, resorts went up just because what we're seeing in the transaction market, as Thomas Fisher alluded to earlier, is very constructive and pricing continues to be healthy there. We took down a couple.

Speaker #7: And pricing continues to be healthy there. We took down a couple.

Speaker #5: Is that an operating performance?

Jon Bortz: Operating performance continued to go up.

Speaker #7: An operating performance continued to go up as evidenced by our quarter and how strong the resort segment has been and continues to be. Some markets in San Francisco, we also brought up just because of, again, the performance of that market.

Raymond Martz: Operating performance continued to go up as evidenced by our quarter and how strong the resort segment has been and continues to be. Some markets, San Francisco were also brought up just because of, again, the performance of that market. You've seen some trades in there, which also helps affirm the values. A couple markets we took down were Washington, DC, because of the performance, Los Angeles, a nudge, as well as Boston and San Diego. Overall, the gross values did not change on that side. What did change is we have more cash. We have less preferred through the buybacks, and we have less shares through the buyback. What really moved is on that side of it, we moved the overall value up, and that's what our NAV went from $23.50 last quarter up to $24.50. As we know, we'll continue.

Speaker #7: You've seen some trades in there, which obviously helps affirm the values. A couple of markets we took down were Washington, DC because of the performance.

Raymond Martz: A couple markets we took down were Washington, DC, because of the performance, Los Angeles, a nudge, as well as Boston and San Diego. Overall, the gross values did not change on that side. What did change is we have more cash. We have less preferred through the buybacks, and we have less shares through the buyback. What really moved is on that side of it, we moved the overall value up, and that's what our NAV went from $23.50 last quarter up to $24.50. As we know, we'll continue.

Speaker #7: Los Angeles, a nudge, as well as Boston and San Diego. But overall, the gross values did not change. On that side, what did change is we have more cash.

Speaker #7: We have less preferred through the buybacks, and we have fewer shares through the buyback. So what really moved is, on that side of it, we moved the overall value up.

Speaker #7: And that's what our NAV went from 23.50. Last quarter, up to 24.50. And as we know, we'll continue. We look at this every pretty frequently.

Raymond Martz: We look at this pretty frequently, and we'll see what it entails going forward. Then the capital allocation decision, we just responded to that question there. As Jon said, we'll continue to be opportunistic and disciplined here as we have. Certainly having the free cash flow that we have in place provides us with a lot of flexibility to pull a lot of levers, whichever is opportunistic at the time.

Speaker #7: And we'll see what it entails going forward. And then the capital allocation decision, we just responded to that question there. So as John said, we'll continue to be opportunistic and disciplined here as we have.

Speaker #7: But certainly having the free cash flow that we have, in place, provides us with a lot of flexibility. To pull a lot of levers, whichever is opportunistic at the time.

Speaker #3: Really helpful. Thank you.

David Brown: Really helpful. Thank you.

Jack Armstrong: Really helpful. Thank you.

Speaker #9: Thanks, Jack.

Jon Bortz: Thanks, Jack.

Speaker #2: We have reached the end of the question-and-answer session. Mr. Bortz, I’d like to turn the floor back over to you for closing comments.

Operator 2: We have reached the end of the question and answer session. Mr. Bortz, I'd like to turn the floor back over to you for closing comments.

Operator: We have reached the end of the question and answer session. Mr. Bortz, I'd like to turn the floor back over to you for closing comments.

Speaker #5: Well, thanks, everybody, for participating. Good luck the rest of the quarter. I hope you have a great summers. And we'll be back to update you again on our performance come October.

Jon Bortz: Well, thanks everybody for participating. Good luck the rest of the quarter. Hope you have great summers, and we'll be back to update you again on our performance come October. I know we'll see many of you between now and then. Thanks so much.

Speaker #5: And I know we'll see many of you between now and then. Thanks so much.

Speaker #2: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.

Operator 2: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.

Operator: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.

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Q2 2026 Pebblebrook Hotel Trust Earnings Call

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