Q2 2026 RLJ Lodging Trust Earnings Call

August 7, 2026

Speaker #1: Please stand by. The conference will start soon. Please stand by. The conference will start soon. Greetings, and welcome to the RLJ Lodging Trust second quarter 2026 earnings call.

Operator 2: Please stand by. The conference will start soon. Please stand by. The conference will start soon. Greetings, welcome to the RLJ Lodging Trust Q2 2026 earnings call. At this time, all participants are in a listen-only mode. A 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. I'll now turn the conference over to John-Paul Austin, Director of Investor Relations. Thank you, John. You may begin.

Operator: Greetings, welcome to the RLJ Lodging Trust Q2 2026 earnings call. At this time, all participants are in a listen-only mode. A 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. I'll now turn the conference over to John-Paul Austin, Director of Investor Relations. Thank you, John. You may begin.

Speaker #1: At this time, all participants are in a listen-only mode. A 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.

Speaker #1: As a reminder, this conference is being recorded. I will now turn the conference over to John Paul Austin, Director of Investor Relations. Thank you, John.

Speaker #1: You may begin.

Speaker #2: Thank you, operator. Good afternoon, and welcome to the RLJ Lodging Trust Q2 2026 second quarter earnings call. On today's call, Leslie Hale, our President and Chief Executive Officer, will discuss key highlights for the quarter.

John Paul Austin: Thank you, operator. Good afternoon, welcome to RLJ Lodging Trust 2026 Q2 earnings call. On today's call, Leslie Hale, our President and Chief Executive Officer, will discuss key highlights for the quarter. Nikhil Bhalla, our Chief Financial Officer, will discuss the company's financial results. Tom Bardenett, our Chief Operating Officer, will also be available for Q&A. Forward-looking statements made on this call are subject to numerous risks and uncertainties that may lead the company's actual results to differ materially from what had been communicated. Factors that may impact the results of the company can be found in the company's 10-Q and other reports filed with the SEC. The company undertakes no obligation to update forward-looking statements. As we discuss certain non-GAAP measures, it may be helpful to review the reconciliations to GAAP located in our press release.

Speaker #2: Nikhil Bhalla, our Chief Financial Officer, will discuss the company's financial results. Tom Bardinet, our Chief Operating Officer, will also be available for Q&A. Forward-looking statements made on this call are subject to numerous risks and uncertainties that may lead the company's actual results to differ materially from what has been communicated.

Speaker #2: Factors that may impact the results of the company can be found in the company's 10Q and other reports filed with the SEC. The company undertakes no obligation to update forward-looking statements.

Speaker #2: Also, as we discuss certain non-GAAP measures, it may be helpful to review the reconciliations to GAAP located in our press release. Finally, please refer to the schedule of supplemental information, which includes pro forma operating results for our current hotel portfolio.

John Paul Austin: Please refer to the schedule of supplemental information, which includes pro forma operating results for our current hotel portfolio. I'll now turn the call over to Leslie.

Speaker #2: I'll now turn the call over to Leslie.

Speaker #3: Thanks, John Paul. Good afternoon, everyone, and thank you for joining us today. We are pleased to report strong second-quarter results, which exceeded our expectations.

Leslie D. Hale: Thanks, John-Paul. Good afternoon, everyone, and thank you for joining us today. We are pleased to report strong Q2 results, which exceeded our expectations. Our operating performance reflects broad-based growth across our entire portfolio, as well as the successful ramp of our renovations and conversions. We continue to benefit from the momentum in lodging fundamentals, which are being led by the acceleration of business travel and robust demand around urban leisure experiences, both of which align with our portfolio's overall positioning. Against this positive backdrop, during the quarter, our RevPAR growth outperformed the industry by 110 basis points, with all of our markets delivering results ahead of our expectations. Our out-of-room spend once again exceeded our RevPAR growth. We delivered high single-digit EBITDAG growth with positive margin improvement, and we completed the transformative conversion of our new Autograph Collection asset, further bolstering our lifestyle orientation.

Speaker #3: Our operating performance reflects broad-based growth across our entire portfolio, as well as the successful ramp of our renovations and conversions. We continue to benefit from the momentum in lodging fundamentals, which are being led by the acceleration of business travel and robust demand around urban leisure experiences, both of which align with our portfolio's overall positioning.

Speaker #3: Against this positive backdrop, during the quarter, our RevPark growth outperformed the industry by 110 basis points. With all of our markets delivering results ahead of our expectations, our out-of-room spend once again exceeded our RevPark growth.

Speaker #3: We delivered high single-digit EBITDA growth with positive margin improvement, and we completed the transformative conversion of our new Autograph Collection asset, further bolstering our lifestyle orientation.

Speaker #3: The broad-based nature of the growth across markets and demand segments year-to-date is demonstrating that the strength we are seeing is durable and not reliant on any individual market or event.

Leslie D. Hale: The broad-based nature of the growth across markets and demand segments year to date is demonstrating that the strength we are seeing is durable and not reliant on any individual market or event. These industry tailwinds continue to disproportionately favor urban markets, which are benefiting from diverse demand drivers and an extended period of muted supply growth. Our urban-centric portfolio is well-positioned to capture these tailwinds, which, combined with the upside we are seeing from our capital investments, gives us conviction in our ability to continue delivering strong relative performance. With respect to our operating performance, during the quarter, we achieved RevPAR growth of 6.8%, driven by ADR growth of 4.9%. We also saw a healthy 130 basis point increase in occupancy, which was better than we had expected, reflecting the acceleration in demand we are seeing in the short-term booking window.

Speaker #3: These industry tailwinds continue to disproportionately favor urban markets, which are benefiting from diverse demand drivers and an extended period of muted supply growth. Our urban-centric portfolio is well-positioned to capture these tailwinds, which, combined with the upside we are seeing from our capital investments, gives us conviction in our ability to continue delivering strong relative performance.

Speaker #3: With respect to our operating performance, during the quarter we achieved RevPAR growth of 6.8%, driven by ADR growth of 4.9%. We also saw a healthy 130-basis-point increase in occupancy, which was better than we had expected.

Speaker #3: Reflecting the acceleration in demand we are seeing in the short-term booking window. Each month of the quarter achieved positive RevPark growth, with June being the strongest month, up 12%.

Leslie D. Hale: Each month of the quarter achieved positive RevPAR growth, with June being the strongest month, up 12%. We were encouraged to see these positive trends carry into July with preliminary RevPAR growth approaching 11%. With regard to the World Cup, the performance of our host markets came in line with our expectations as we successfully executed on our revenue management strategy of intentionally building a base of high certainty demand from teams, media, and sponsors while preserving sufficient inventory to capture the transient pickup that materialized closer to the matches. This strategy performed as anticipated by amplifying rate growth. More importantly, beyond the World Cup, we were very encouraged by the broad-based momentum and fundamentals we saw across the entire portfolio, with our non-World Cup markets achieving RevPAR growth of 6.2% and several of these markets delivering double-digit RevPAR growth during Q2.

Speaker #3: We were encouraged to see these positive trends carry into July, with preliminary RevPark growth approaching 11%. With regard to the World Cup, the performance of our host markets came in line with our expectations, as we successfully executed on our revenue management strategy of intentionally building a base of high certainty demand from teams, media, and sponsors of preserving sufficient inventory to capture the transient pickup that materialized closer to the matches.

Speaker #3: This strategy performed as anticipated by amplifying rate growth. More importantly, beyond the World Cup, we were very encouraged by the broad-based momentum in fundamentals we saw across the entire portfolio.

Speaker #3: With our non-World Cup markets achieving RevPAR growth of 6.2%, and several of these markets delivering double-digit RevPAR growth during the second quarter, among these, Austin was a notable outperformer, with RevPAR increasing 17% year-over-year, benefiting from strong in-house group.

Leslie D. Hale: Among these, Austin was a notable outperformer, with RevPAR increasing 17% year-over-year, benefiting from strong in-house group. Other notable markets included Chicago, which saw RevPAR increase by 15%, driven by a strong citywide calendar. Tampa, which grew RevPAR by 11%, benefiting from a healthy event calendar. We also had a number of other markets such as Orlando, Charleston, and DC that produced high single-digit RevPAR growth, all supported by broad-based improvements in segmentation. Additionally, we remain encouraged by the recovery underway in Northern California, with RevPAR growing 9% during Q2. While the market benefited from hosting World Cup matches, its performance continues to be primarily driven by the ongoing expansion of the AI industry, which is fueling corporate investment and business travel against the backdrop of a more constructive local environment, giving us confidence in a positive multiyear trajectory of this market's recovery.

Speaker #3: Other notable markets included Chicago, which saw RevPAR increase by 15%, driven by a strong citywide calendar, and Tampa, which grew RevPAR by 11%, benefiting from a healthy event calendar.

Speaker #3: We also had a number of other markets, such as Orlando, Charleston, and DC, that produced high single-digit RevPark growth, all supported by broad-based improvements in segmentation.

Speaker #3: Additionally, we remain encouraged by the recovery underway in Northern California, with RevPAR growing 9% during the second quarter. While the market benefited from hosting World Cup matches, its performance continues to be primarily driven by the ongoing expansion of the AI industry, which is fueling corporate investment and business travel against the backdrop of a more constructive local environment. This gives us confidence in the positive multi-year trajectory of this market's recovery.

Speaker #3: As it relates to segmentation, business transient revenues continue to accelerate, increasing by a robust 10%. This increase was led by demand growth of 6%, with the rate increasing by 4%.

Leslie D. Hale: As it relates to segmentation, business transient revenues continued to accelerate, increasing by a robust 10%. This increase was led by demand growth of 6%, with the rate increasing by 4%, reflecting ongoing pricing power as our highest-rated customer continues to increase their travel. The acceleration in BT is supported by elevated levels of business investment and earnings growth broadly across many industries, including tech, finance, healthcare, and defense. Encouragingly, we continue to observe strong demand among both large corporates as well as small and medium-sized businesses. As expected, the leisure segment performed well in Q2, with revenues increasing by 7% as pricing improved meaningfully with a 6% increase in rate while demand remained healthy with a 1% increase in room nights.

Speaker #3: Reflecting ongoing pricing power, as our highest-rated customer continues to increase their travel. The acceleration in BT is supported by elevated levels of business investment and earnings growth broadly across many industries, including tech, finance, healthcare, and defense.

Speaker #3: Encouragingly, we continue to observe strong demand among both large corporates as well as small and medium-sized businesses. As expected, the leisure segment performed well in the second quarter, with revenues increasing by 7%, as pricing improved meaningfully, with a 6% increase in rate, while demand remained healthy with a 1% increase in room nights.

Speaker #3: Our hotels and live-work-play locations continue to benefit broadly from strong urban leisure trends, reflecting the ongoing shift in consumer preferences toward urban entertainment, which was aided by the World Cup during the second quarter.

Leslie D. Hale: Our hotels and live-work-play locations continue to benefit broadly from strong urban leisure trends, reflecting the ongoing shift in consumer preferences toward urban entertainment, which was aided by the World Cup during Q2. With respect to group, our revenues grew 6% during the quarter, balanced evenly between demand and ADR. While the booking window remains short, near-term demand is continuing to materialize. As demonstrated by our end-of-quarter full-to-quarter group pace improving by 300 basis points during Q2. Additionally, we are encouraged by the growing share of corporate demand within our group mix, which is contributing to our high ADR and non-room revenues.

Speaker #3: With respect to group, our revenues grew 6% during the quarter, balanced evenly between demand and ADR. While the booking window remained short, near-term demand is continuing to materialize.

Speaker #3: As demonstrated by our end-of-quarter group pace, improving by 300 basis points during the second quarter. We were also pleased to see a meaningful pickup in our booking pace for the third quarter, which is now pacing at 110% of last year.

Speaker #3: Additionally, we are encouraged by the growing share of corporate demand within our group mix, which is contributing to our high ADR and non-room revenues.

Speaker #3: The strength we are seeing across each of our demand segments continues to have positive implications for our out-of-room spend, which grew by 7% during the second quarter.

Leslie D. Hale: The strength we are seeing across each of our demand segments continues to have positive implications for our out-of-room spend, which grew by 7% during Q2. These results once again underscore the success of our ROI initiatives as well as our renovations and conversions aimed at growing food and beverage profitably, reconcepting underutilized space, and growing other ancillary revenues. This strong top-line performance translated into EBITDA growth of 7%. During the quarter, our occupancy growth exceeded our expectations, and as a result, expense growth was higher than anticipated, although we still were able to achieve margin improvement. Now, with regard to capital allocation, the successful execution of our investments in our portfolio is unlocking value and is clearly evident in our performance. During Q2, our four high-impact renovations completed last year achieved 22% revenue growth and 50% EBITDA growth.

Speaker #3: These results, once again, underscore the success of our ROI initiatives, as well as our renovations and conversions aimed at growing food and beverage profitably, re-concepting underutilized space, and growing other ancillary revenues.

Speaker #3: This strong top-line performance translated into EBITDA growth of 7%. During the quarter, our occupancy growth exceeded our expectations, and as a result, expense growth was higher than anticipated, although we were still able to achieve margin improvement.

Speaker #3: Now, with regard to capital allocation, the successful execution of our investments in our portfolio is unlocking value, and it's clearly evident in our performance.

Speaker #3: During the second quarter, our four high-impact renovations completed last year achieved 22% revenue growth and 50% EBITDA growth, while our seven previously completed conversions achieved revenue growth of 8% and EBITDA growth of 12%.

Leslie D. Hale: While our seven previously completed conversions achieved revenue growth of 8% and EBITDA growth of 12%. These results continue to reinforce our conviction around the investments we are making in our assets and contributed to our outperformance. During the quarter, we completed the conversion of the former Renaissance Pittsburgh, relaunching the hotel as The Atterbury under Marriott's Autograph Collection. The name Atterbury pays tribute to the original architect who designed the iconic building that opened in 1906. Our comprehensive renovation reimagined all public spaces and guest rooms and activated revenue-generating spaces to leverage the character of this historic asset. This included the addition of The Drafting Room, which is the hotel's signature restaurant and bar, the addition of the Fulton Room, a new premium function space, and the activation of the hotel's historic rotunda, which now hosts a light show showcasing Pittsburgh's rich history.

Speaker #3: These results continue to reinforce our conviction around the investments we are making in our assets and contributed to our outperformance. During the quarter, we completed the conversion of the former Renaissance Pittsburgh.

Speaker #3: We are relaunching the hotel as The Atterberry under Marriott's Autograph Collection. The name Atterberry pays tribute to the original architect who designed the iconic building that opened in 1906.

Speaker #3: Our comprehensive renovation reimagined all public spaces and guest rooms, and activated revenue-generating spaces to leverage the character of this historic asset. This included the addition of the Drafting Room, which is the hotel's signature restaurant and bar.

Speaker #3: The addition of the Fulton Room, a new premium function space, and the activation of the hotel's historic rotunda, which now hosts a light show showcasing Pittsburgh's rich history.

Speaker #3: We are also excited to announce that we will be adding Margaritaville to our family of brand affiliations by converting our Fairfield Inn & Suites Ski West to an 'Encompass by Margaritaville.'

Leslie D. Hale: We are also excited to announce that we will be adding Margaritaville to our family of brand affiliations by converting our Fells Point Inn & Suites Key West to a Compass by Margaritaville. The Margaritaville lifestyle orientation, strong recognition among leisure travelers, and its origin in Key West make it a natural fit. As one of the highest ADR markets in the country, the reimagination of this asset will allow us to capture higher-rated leisure demand while creating opportunities to drive ancillary revenue growth. Our repositioning will reimagine the property into an island resort with new themed inspired concepts, including Five O'Clock Somewhere, a new poolside cabana bar that will tie in the aesthetics and spirit of Key West with live music and immersive F&B. We plan to initiate the conversion later this year and relaunch in 2027.

Speaker #3: The Margaritaville lifestyle orientation has strong recognition among leisure travelers, and its origin in Key West makes it a natural fit, as it is one of the highest ADR markets in the country.

Speaker #3: The reimagination of this asset will allow us to capture higher-rated leisure demand, while creating opportunities to drive ancillary revenue growth. Our repositioning will reimagine the property into an island resort with new themed-inspired concepts, including 5 O'Clock Somewhere, a new poolside cabana bar that will tie in the aesthetics and spirit of Key West with live music and immersive F&B.

Speaker #3: We plan to initiate the conversion later this year and relaunch in 2027. And finally, we made progress towards initiating the physical renovation at our Wyndham Boston, which will join Hilton's Tapestry Collection.

Leslie D. Hale: Finally, we made progress towards initiating the physical renovation at our Wyndham Boston, which will join Hilton's Tapestry Collection. With each of these conversions, we continue to increase our exposure to the lifestyle segment and evolving consumer trends. These repositionings are also consistent with our broader strategy of creating opportunities to drive high-margin out-of-room spend with thoughtful execution that allows us to attract customers beyond our hotel guests. In addition to advancing our internal growth pipeline, we remain an active portfolio manager and opportunistically sold a hotel at a highly accretive basis during the quarter. Overall, our strong balance sheet and liquidity continues to position us to drive growth this year and beyond. Now turning to our outlook. While there is considerable geopolitical uncertainty and limited visibility, we are raising our outlook for the full year to reflect our strong Q2 performance and the ongoing positive trends.

Speaker #3: With each of these conversions, we continue to increase our exposure to the lifestyle segment and evolving consumer trends. These repositionings are also consistent with our broader strategy of creating opportunities to drive high-margin, out-of-room spend with thoughtful execution that allows us to attract customers beyond our hotel guests.

Speaker #3: In addition to advancing our internal growth pipeline, we remain an active portfolio manager and opportunistically sold a hotel at a highly accretive basis during the quarter.

Speaker #3: Overall, our strong balance sheet and liquidity continue to position us to drive growth this year and beyond. Now, turning to our outlook, while there is considerable geopolitical uncertainty and limited visibility, we are raising our outlook for the full year to reflect our strong second quarter performance and the ongoing positive trends.

Speaker #3: As we enter the second half of the year, we remain optimistic that a resilient economy and consumer preferences that favor urban leisure experiences will continue to drive healthy demand against a backdrop of muted supply growth.

Leslie D. Hale: As we enter the H2 of the year, we remain optimistic that a resilient economy and consumer preferences that favor urban leisure experiences will continue to drive healthy demand against a backdrop of muted supply growth. As such, our outlook for the remainder of the year assumes the continuation of tailwinds that have supported our performance thus far, including sustained momentum and the recovery of business travel, leisure demand remaining healthy, especially in urban markets, positive group revenue pace, and continued strength for the quarter bookings, and additional tailwinds from the continued ramp of our conversions. As we move into the H2 of 2026, we expect the incremental contribution from demand growth to continue, as evidenced by July seeing 300 basis points of occupancy growth, resulting in slightly higher expense growth moving forward than we had anticipated in our prior outlook.

Speaker #3: As such, our outlook for the remainder of the year assumes the continuation of tailwinds that have supported our performance thus far, including sustained momentum in the recovery of business travel, leisure demand remaining healthy—especially in urban markets—positive group revenue pace, continued strength of in-the-quarter-for-the-quarter bookings, and additional tailwinds from the continued ramp of our conversions.

Speaker #3: As we move into the second half of 2026, we expect the incremental contribution from demand growth to continue. As evidenced by July seeing 300 basis points of occupancy growth, resulting in slightly higher expense growth moving forward than we had anticipated in our prior outlook.

Speaker #3: Overall, our first-half outperformance is a direct reflection of our positioning in urban markets, which are benefiting from the momentum in BT and a recurring calendar of sports, concerts, festivals, conventions, and other events that draw travelers into urban markets year over year.

Leslie D. Hale: Overall, our H1 outperformance is a direct reflection of our positioning in urban markets, which are benefiting from the momentum in BT and a recurring calendar of sports, concerts, festival, conventions, and other events that draw travelers into urban markets year-over-year. These factors, along with embedded growth from our capital investments and the resiliency of the broader economy, give us confidence in our ability to deliver strong relative performance through the remainder of the year. That said, we remain mindful that visibility is limited given the short booking window and the evolving macro backdrop, and we will continue to monitor for any shifts in demand as the year progresses. As we look to 2027, the setup is favorable, with sustained strength expected from the underlying demand trends, particularly as it relates to BT.

Speaker #3: These factors, along with embedded growth from our capital investments and the resiliency of the broader economy, give us confidence in our ability to deliver strong relative performance through the remainder of the year.

Speaker #3: That said, we remain mindful that visibility is limited given the short booking window and the evolving macro backdrop, and we will continue to monitor for any shifts in demand as the year progresses.

Speaker #3: As we look to 2027, the setup is favorable, with sustained strength expected from the underlying demand trends, particularly as it relates to BT. A favorable holiday calendar, the rotation of major events within urban markets—such as the Super Bowl, the NCAA Tournament, the NFL Draft, Formula One, and pre-Olympic activity—and the ongoing recovery in Northern California.

Leslie D. Hale: A favorable holiday calendar, the rotation of major events within urban markets, such as the Super Bowl, the NCAA tournament, the NFL Draft, Formula 1, and pre-Olympic activity, and the ongoing recovery in Northern California, all of which will occur against a constrained supply backdrop. Overall, we are pleased with the setup leading into next year. With that, I will now turn the call over to Nikhil.

Speaker #3: All of which will occur against a constrained supply backdrop. Overall, we are pleased with the setup leading into next year. With that, I will now turn the call over to Nikhil.

Speaker #1: Thanks, Leslie. To start, our comparable numbers include our 91 hotels owned at the end of the second quarter. Our reported corporate adjusted EBITDA and AFFO include operating results from all sold hotels during RLJ's ownership period.

Nikhil Bhalla: Thanks, Leslie. To start, our comparable numbers include our 91 hotels owned at the end of Q2. Our reported corporate adjusted EBITDA and AFFO include operating results from all sold hotels during RLJ's ownership period. We were pleased with our Q2 results that came in significantly ahead of our expectations and outperformed relative to the industry. Our Q2 RevPAR of $167 increased by 6.8% versus the prior year, led by average daily rate increasing by 4.9% to $217, and occupancy increasing ahead of our expectations to 77%, an increase of 130 basis points. RevPAR growth in April actualized at 5.8%. May came in at a healthy 2.5% despite difficult comps. June achieved an impressive 12.4% RevPAR growth, driven by strong fundamentals and further aided by the World Cup.

Speaker #1: We were pleased with our second-quarter results, which came in significantly ahead of our expectations and outperformed relative to the industry. Our second-quarter RevPAR of $167 increased by 6.8% versus the prior year.

Speaker #1: Led by average daily rate increasing by 4.9% to $217, and occupancy increasing ahead of our expectations to 77%, an increase of 130 basis points.

Speaker #1: Ref bar growth in April actualized at 5.8%. May came in at a healthy 2.5%, despite difficult comps, and June achieved an impressive 12.4% ref bar growth.

Speaker #1: Driven by strong fundamentals and further aided by the World Cup, our urban markets once again achieved strong RevPAR growth, benefiting from accelerating business travel, which saw revenues increase by a robust 10% during the second quarter.

Nikhil Bhalla: Our urban markets once again achieved strong RevPAR growth, benefiting from accelerating business travel, which saw revenues increase by a robust 10% during Q2, building on the 9% growth we achieved in Q1. A number of our urban markets saw double-digit BT revenue growth, including Chicago and DC, which grew by 35% each, New York, which was up 17%, Houston up 13%, Northern California up 12%, and South Florida up 10%. In addition to capturing solid BT trends, which was evident in the 6.3% increase in our weekday revenues, our portfolio also benefited from strong urban leisure demand, which led weekend revenues to grow by 8.1%. Once again demonstrating our portfolio's ideal positioning to benefit from seven-day-a-week demand. The strength in our urban markets contributed to the outsized growth of our non-room revenues by leveraging the investments we've made in our ROI initiatives.

Speaker #1: Building on the 9% growth we achieved in the first quarter, a number of our urban markets saw double-digit BT revenue growth, including Chicago and D.C., which grew by 35% each; New York, which was up 17%; Houston, up 13%; Northern California, up 12%; and South Florida, up 10%.

Speaker #1: In addition to capturing solid BT trends, which was evident in the 6.3% increase in our weekday revenues, our portfolio also benefited from strong urban leisure demand, which led weekend revenues to grow by 8.1%, once again demonstrating our portfolio's ideal positioning to benefit from seven-day-a-week demand.

Speaker #1: The strength in our urban markets contributed to the outsized growth of our non-room revenues by leveraging the investments we've made in our ROI initiatives.

Speaker #1: These investments allowed our out-of-room spend to increase by 7.1%, or 30 basis points ahead of our RevPAR performance. Our strong top-line growth allowed us to flow results to the bottom line, highlighting the benefits of our lean operating model, and allowed us to grow hotel EBITDA by 7%, despite higher operating costs.

Nikhil Bhalla: These investments allowed our out-of-room spend to increase by 7.1%, or 30 basis points ahead of our RevPAR performance. Our strong top-line growth allowed us to flow results to the bottom line, highlighting the benefits of our lean operating model and allowed us to grow hotel EBITDA by 7%, despite higher operating costs. On a per occupied room basis, expenses increased by 4.9%, largely reflecting variable expense growth associated with a higher transient mix. This drove increased credit card and travel agent commission fees, as well as greater spend in F&B outlets, which carry a higher expense load. Additionally, energy costs remained elevated. Our fixed costs increased by 6.4%, primarily due to the impact of a tax refund recognized in the prior year. Excluding that prior year tax benefit, fixed costs would have increased just 3.4%.

Speaker #1: On a per-occupied room basis, expenses increased by 4.9%, largely reflecting variable expense growth associated with a higher transient mix. This drove increased credit card and travel agent commission fees, as well as greater spend in F&B outlets, which carry a higher expense load.

Speaker #1: Additionally, energy costs remained elevated. Our fixed costs increased by 6.4%, primarily due to the impact of a tax refund recognized in the prior year.

Speaker #1: Excluding that prior year tax benefit, fixed costs would have increased just 3.4%. For the second quarter, our portfolio achieved hotel EBITDA of $119.5 million, representing year-over-year growth of $8 million, or 7.1%, and hotel EBITDA margins of 31.3%, which improved by 10 basis points over the prior year, or 40 basis points without the prior year tax benefit.

Nikhil Bhalla: For the second quarter, our portfolio achieved hotel EBITDA of $119.5 million, representing year-over-year growth of $8 million or 7.1%, and hotel EBITDA margins of 31.3%, which improved by 10 basis points over the prior year, or 40 basis points without the prior year tax benefit. These results translated to adjusted EBITDA of $110.4 million and adjusted FFO per diluted share of $0.52. Turning to our balance sheet. At the end of the second quarter, we drew down proceeds under the delayed draw feature of the term loans executed earlier this year to pay off our senior notes that matured on 1 July. Subsequent to this repayment, we have $2.2 billion of debt and no maturities due until 2029.

Speaker #1: These results translated to adjusted EBITDA of 110.4 million share of 52 cents. Turning to our balance sheet, at the end of the second quarter, we drew down proceeds under the delayed draw feature of the term loans executed earlier this year to pay off our senior notes that matured on July 1.

Speaker #1: Subsequent to this repayment, we have $2.2 billion of debt and no maturities due until 2029. Overall, our balance sheet remains well-positioned with solid liquidity of approximately $1 billion, including $600 million of undrawn capacity on our corporate revolver, 83 of our 91 hotels unencumbered by debt, and an attractive weighted average interest rate of 4.8%, with 72% of our debt either fixed or hedged at the end of the second quarter.

Nikhil Bhalla: Overall, our balance sheet remains well-positioned with solid liquidity of approximately $1 billion, including $600 million of undrawn capacity on our corporate revolver, 83 of our 91 hotels unencumbered by debt, an attractive weighted average interest rate of 4.8%, and 72% of our debt either fixed or hedged at the end of the second quarter. With respect to capital allocation, during the quarter, we opportunistically sold one hotel at a highly accretive multiple of 29.2x hotel EBITDA, including required capital expenditures. Additionally, we are unlocking embedded portfolio value and further enhancing our lifestyle orientation as we execute our high-value conversions in Pittsburgh, Boston, and the addition of Margaritaville to our brand portfolio in Key West, while remaining committed to returning capital to shareholders through a well-covered dividend of $0.15 per share.

Speaker #1: With respect to capital allocation, during the quarter, we opportunistically sold one hotel at a highly accretive multiple of 29.2 times hotel EBITDA. Including required capital expenditures.

Speaker #1: Additionally, we are unlocking embedded portfolio value and further enhancing our lifestyle orientation as we execute our high-value conversions in Pittsburgh and Boston, and with the addition of Margaritaville to our brand portfolio in Key West.

Speaker #1: While remaining committed to returning capital to shareholders through a well-covered dividend of $0.15 per share, we will continue to make prudent capital allocation decisions to position our portfolio to drive growth, while maintaining a strong and flexible balance sheet.

Nikhil Bhalla: We will continue to make prudent capital allocation decisions to position our portfolio to drive growth while maintaining a strong and flexible balance sheet. Turning to our full-year outlook. Our updated guidance reflects the sale of the Hyatt Place Fremont/Silicon Valley, our strong second quarter outperformance, and the continuation of the current operating and macroeconomic environment. For 2026, we now expect comparable RevPAR growth to range between 3.5% and 4.5%, comparable hotel EBITDA to range between $369 million and $389 million, corporate adjusted EBITDA to range between $336 million and $356 million, and adjusted FFO per diluted share to be between $1.37 and $1.50. Our outlook assumes no additional acquisitions, dispositions, or balance sheet activity beyond what has been completed to date. We continue to estimate capital expenditures will be in the range of $80 million to $90 million.

Speaker #1: Turning to our full-year outlook, our updated guidance reflects the sale of the Hyatt Place Fremont Silicon Valley, our strong second-quarter outperformance, and a continuation of the current operating and macroeconomic environment.

Speaker #1: For 2026, we now expect comparable ref bar growth to range between 3.5% and 4.5%, comparable hotel EBITDA to range between 369 million dollars and 389 million dollars, corporate adjusted EBITDA to range between 336 million dollars and 356 million dollars, and adjusted FFO per diluted share to be between a dollar and 37 cents and dollar and 50 cents.

Speaker #1: Our outlook assumes no additional acquisitions, dispositions, or balance sheet activity beyond what has been completed today. We continue to estimate capital expenditures will be in the range of 80 million dollars to 90 million dollars, cash G&A will be in the range of 33.5 million dollars to 34.5 million dollars, and expect net interest expense will be in the range of 101 million dollars to 103 million dollars.

Nikhil Bhalla: Cash G&A will be in the range of $33.5 million to $34.5 million and expect net interest expense will be in the range of $101 million to $103 million. We also expect the relationship between top line growth and expense growth during the H2 to be similar to the H1 of this year. With respect to the cadence for the remainder of the year, we expect our Q3 performance to be stronger than the Q4. As such, we expect the contribution of adjusted EBITDA for the Q3 to be about 100 basis points higher than last year's Q3. Finally, please refer to our press release from last evening for additional details on our outlook and to our schedule of supplemental information, which will include comparable 2026 and 2025 quarterly operating results for our 91-hotel portfolio. Thank you. This concludes our prepared remarks.

Speaker #1: We also expect the relationship between top-line growth and expense growth during the second half to be similar to the first half of this year.

Speaker #1: With respect to the cadence for the remainder of the year, we expect our third quarter performance to be stronger than the fourth quarter. As such, we expect the contribution of adjusted EBITDA for the third quarter to be about 100 basis points higher than last year's third quarter.

Speaker #1: Finally, please refer to our press release from last evening for additional details on our outlook, and to our schedule of supplemental information, which will include comparable 2026 and 2025 quarterly operating results for our 91-hotel portfolio.

Speaker #1: Thank you, and this concludes our prepared remarks. We will now open the line for Q&A. Operator, thank you.

Nikhil Bhalla: We will now open the line for Q&A. Operator?

Operator 2: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment please while we pull for questions. Thank you. Our first question comes from the line of Michael Bellisario with Baird. Please proceed.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment please while we pull for questions. Thank you. Our first question comes from the line of Michael Bellisario with Baird. Please proceed.

Speaker #2: We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad.

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

Speaker #2: Thank you. Our first question comes from the line of Michael Bellisario with Baird. Please proceed.

Speaker #3: Thanks. Good afternoon, everyone.

Michael Bellisario: Thanks. Good afternoon, everyone.

Speaker #4: Good afternoon.

Leslie D. Hale: Good afternoon.

Michael Bellisario: I want to ask on the BT strength that you referenced, are you seeing this demand come through the GDS, or is it more local negotiated accounts? Then any specific industries or notable booking patterns to call out would be helpful. Thank you.

Speaker #3: I want to ask about the BT strengths that you referenced. Are you seeing this demand come through the GDS, or is it more local negotiated accounts? And then, any specific industries or notable booking patterns to call out would be helpful.

Speaker #3: Thank you.

Speaker #4: Yeah. Hey, Mike. The strength on BT, I think it's important to point out. I mean, this is the second consecutive quarter that we saw BT revenues increase by 10%, and room nights were up 6% in the second quarter, which I think is an important data point.

Leslie D. Hale: Yeah. Hey, Mike. The strength on BT, I think it's important to point out, this is the second consecutive quarter that we saw BT revenues increase by 10%, and room nights were up 6% in Q2, which I think is an important data point. We also saw midweek trends up 6%, and it's really been broad-based. As Nikhil mentioned, there were a number of markets that saw double-digit growth in BT. It is coming from our national accounts in GDS, and it's industries like tech, finance, defense. I'm also remind you that this is our highest-rated customers coming back. This is benefiting us on rate and also benefiting us in F&B as well. We feel really good about the strength we're seeing in BT and the ability for it to continue.

Speaker #4: We also saw midweek trends up 6%, and it's really been broad-based. As Nikhil mentioned, there were a number of markets that saw double-digit growth in BT.

Speaker #4: And it is coming from our national accounts in GDS, and it's industries like tech, finance, defense. And I'm also reminding you that these are our highest-rated customers coming back.

Speaker #4: So this is benefiting us on rate and also benefiting us in F&B as well. So we feel really good about the strength we're seeing in BT, and the ability for it to continue.

Speaker #3: The only other thing I'd offer, Mike, is that it is increasing in the total mix when we think about transient. It moved up another 1% because of the demand that Leslie was talking about in regard to room nights.

Thomas Bardenett: The only other thing I'd offer, Mike, is it is increasing in the total mix when we think about transient. It moved up another 1% because of the demand that Leslie was talking about in regards to room nights. We're also getting the average rate increases based on the RFP season was successful from last year. The other thing that I would add, too, is when you think about where they're booking through, and you're spot on the GDS side, that also increased from a percentage standpoint, as Leslie stated, which is encouraging because that's where that channel tends to book the clientele that travels from a BT standpoint.

Speaker #3: And we're also getting the average rate increases based on the RFP season that was successful from last year. The other thing that I would add, too, is when you think about where they're booking through—and you're spot on on the GDS side—that also increased from a percentage standpoint, as Leslie stated, which is encouraging because that's where that channel tends to book the clientele that travels from a BT standpoint.

Michael Bellisario: That's helpful. Then just my follow-up on margins and flow-through, and sort of asking this, X some of the onetime items that you noted, how are you thinking about sort of the underlying growth run rate for both fixed and variable expenses on a go-forward basis? That's all for me. Thank you.

Speaker #3: That's helpful. And then just a follow-up on margins and flow-through, and sort of asking this excluding some of the one-time items that you noted. How are you thinking about the underlying growth run rate for both fixed and variable expenses on a go-forward basis?

Speaker #3: And that's all from me. Thank you.

Speaker #4: Yeah, let me sort of frame the second quarter expense growth. As Nikhil mentioned, our fixed expenses were up 6.4%. If you adjust that for taxes, it's 3.5%.

Leslie D. Hale: Yeah. Let me sort of frame the Q2 expense growth. As Nikhil mentioned, our fixed expenses were up 6.4%. If you adjust that for taxes, it's 3.5%. From a POR perspective, we were up 4.9%. It's a couple of things that are sort of driving that. One, we had higher occupancy than we had anticipated, and obviously with higher occupancy growth versus rate growth, there's a higher cost associated with that. Additionally, we had higher transient contribution, and with that, you have higher transaction costs, such as TAs and credit card revenue-related costs that Nikhil mentioned. Additionally, we had a shorter length of stay this quarter, which has higher checkouts, and so with a portfolio of 50% suites, that has some level of impact.

Speaker #4: From a POR perspective, we were up 4.9%. There are a couple of things that are driving that. One, we had higher occupancy than we had anticipated.

Speaker #4: And obviously, with higher occupancy growth versus rate growth, there’s a higher cost associated with that. Additionally, we had higher transient contribution, and with that, you have higher transaction costs such as TAs and credit card revenue-related costs that Nikhil mentioned.

Speaker #4: Additionally, we had a shorter length of stay this quarter, which has higher checkouts. And so, with a portfolio of 50% suites, that has some level of impact.

Speaker #4: And I would also say that the transient mix we had this quarter was more in F&B outlets as opposed to our banquets. And outlets have a higher expense load relative to the banquet F&B.

Leslie D. Hale: I would also say that the transient mix we had this quarter had a higher spend within our F&B outlets as opposed to our banquets. Outlets have a higher expense load relative to the banquet F&B. That was a little different this quarter as well. Lastly, two other things worth noting. One is that because we had better performance year-to-date, we did have some bonus accruals at the properties for the staff, in addition to the energy cost that I think Nikhil mentioned as well. When we look at expense growth for H2, our guidance implies 3% at the midpoint and 4% at the top end, so there is a deceleration from the Q2.

Speaker #4: So that was a little different this quarter as well. And then lastly, there are two other things worth noting. One is that, because we had better performance year-to-date, we did have some bonus accruals at the properties for the staff, in addition to the energy costs that I think Nikhil mentioned as well.

Speaker #4: So, when we look at expense growth for the back half of the year, our guidance implies 3% at the midpoint and 4% at the top end.

Speaker #4: So, there is a deceleration from the second quarter.

Speaker #3: Very helpful. Thank you.

Michael Bellisario: Very helpful. Thank you.

Speaker #2: Thank you. Our next question comes from the line of Austin Wordsmith with KeyBank Capital Markets. Please proceed.

Operator 2: Thank you. Our next question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets. Please proceed.

Operator: Thank you. Our next question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets. Please proceed.

Speaker #3: Great, thanks. Good afternoon. Leslie, I appreciate all the details you gave on July. I guess as you look forward, though, can you talk a little bit about the booking pace for the months ahead, and just how you're thinking about the relative performance between the three business segments, given the strength—especially that you're seeing within BT?

Austin Wurschmidt: Great. Thanks. Good afternoon. Leslie, appreciate all the details you gave on July. I guess as you look forward, though, can you talk a little bit about the booking pace for the months ahead and just how you're thinking about the relative performance between the three business segments, given the strength especially that you're seeing within BT?

Speaker #4: Yeah, sure, Austin. I would say that our change in guidance reflects two things. One, it obviously reflects the better performance in the second quarter, but it also assumes an improvement in the back half of the year.

Leslie D. Hale: Yeah, sure. Austin, I would say that our change in guidance reflects two things. One is a change obviously reflects the better performance the Q2, but also assumes an improvement in the H2 of the year, that improvement's being driven by the continued strength of BT remaining strong in terms of who's traveling, the frequency, and the length of stay related to that demand that we just talked about. We expect leisure demand to remain healthy. We expect group to actualize at its current pace. We're looking at pace for about 104% for the full year, 110% in Q3. All of those segments are going to benefit urban markets, and keep in mind that we still expect our renovations and our conversions to continue to ramp.

Speaker #4: And that improvement is being driven by the continuous strength of BT, remaining strong in terms of who’s traveling, the frequency, and the length of stay related to that demand that we just talked about.

Speaker #4: We expect leisure demand to remain healthy. We expect group to actualize at its current pace. We're looking at pace for about 104% for the full year, and 110% in the third quarter.

Speaker #4: And all of those segments are going to benefit urban markets. And keep in mind that we still expect our renovations and our conversions to continue to ramp.

Speaker #4: When I think about the back half of the year from a cadence perspective, as Nikhil mentioned, we expect the third quarter to be better than the fourth quarter.

Leslie D. Hale: When I think about the H2 of the year from a cadence perspective, as Nikhil mentioned, we expect Q3 to be better than Q4. If I were to break that down, Q3 is obviously off to a strong start with July being up 11%. I would say August is expected to be relatively flat, and September's going to benefit from the Salesforce, but we do have Labor Day later in that month. When I think about the Q4, we see that because Salesforce shifted, our pace for the Q4 is actually down year-over-year. While we do expect the benefit from the lapsing of the government shutdown, it will be offset by the election.

Speaker #4: But if I were to break that down, the third quarter is obviously off to a strong start, with July being up 11%. I would say August is expected to be relatively flat.

Speaker #4: And September is going to benefit from the Salesforce, but we do have Labor Day later in that month. And when I think about the fourth quarter, we see that because Salesforce shifted, our pace for the fourth quarter is actually down year over year.

Speaker #4: And while we do expect to benefit from the lapsing of the government shutdown, it will be offset by the election. The other thing that I would point out for us in the back half of the year is that we are starting our conversion renovations for Boston and Key West.

Leslie D. Hale: The other thing that I would point out for us in the H2 of the year is that we are starting our conversion renovations for Boston and Key West. I think it's important to understand that we believe that fundamentals remain healthy and that fundamentals are keeping with the momentum we see today, but there are some puts and takes on the back half that from a timing perspective of how things shifted. October being the significant contribution month for the Q4, the pace in that month is down because Salesforce moved from October to September. We still believe that BT is going to continue to show good strength.

Speaker #4: I think it's important to understand that we believe the fundamentals remain healthy, and that fundamentals are in keeping with the momentum we see today.

Speaker #4: But there are some puts and takes on the back half, from a timing perspective, of how things shifted. And so, October is the significant contribution month for the fourth quarter. The pace in that month is down because sales forced moved from October to September.

Speaker #4: And so, we still believe that BT is going to continue to show good strength.

Speaker #3: I appreciate all the details there. And then, just some clarifications on the expense side. Did you say 3% expense for the full year? And is that total expense or on a per-occupied room basis?

Austin Wurschmidt: I appreciate all the details there, then just some clarifications on the expense side. Did you say 3% expense for the full year? Is that on a total expense or on a per occupied room basis? What does the back half assume for expenses on a per occupied room basis? Thank you.

Speaker #3: And what does the back half assume for expenses on a per-occupied room basis? Thank you.

Speaker #4: Yeah, and just to clarify, that implied 3% was for the back half of the year, Austin. So it was an implied 3% for the back half of the year.

Leslie D. Hale: Yeah, just to clarify, that implied 30% was for H2, Austin, from that. It was implied 3% for H2 at the midpoint, implied 4% for H2 at the high end of our guidance. Does that answer your question?

Speaker #4: I thought midpoint implied 4% growth for the back half of the year at the high end of our guidance. Does that answer your question?

Speaker #3: Is that total expense growth on a year-over-year basis, or per-occupied room basis?

Austin Wurschmidt: Is that total expense growth on a year-over-year basis or per occupied room basis?

Speaker #4: That is total expense.

Leslie D. Hale: That is total expense.

Speaker #5: And on a per-occupied room basis, Austin, it's going to be very similar, too.

Nikhil Bhalla: On a per occupied room basis, Austin, it's going to be very similar, too.

Speaker #3: Great. Thank you.

Austin Wurschmidt: Great. Thank you.

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

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

Speaker #2: Thank you. Our next question comes from the line of Gregory Miller with Tourist Securities. Please proceed.

Speaker #3: Thank you. Good afternoon, everybody. I'd like to start off with the Compass Key West conversion. It's interesting to me because I personally don't know as much about the Compass flag, and perhaps that's the same for some of the listeners.

Gregory Miller: Thank you. Good afternoon, everybody. I'd like to start off with the Compass Key West conversion. I was interested in this. I personally don't know as much about it on this slide, and perhaps that's the same for some of the listeners. To my knowledge, they're admittedly not compared to the core brand Margaritaville.

Speaker #3: And to my knowledge, there aren't that many of them compared with the core brand, Margaritaville.

Speaker #4: Hey, Greg. Hey, Greg. We can't hear you. You are very jumbled. I apologize.

Leslie D. Hale: Hey, Greg. We can't hear you. You're very jumbled. I apologize.

Speaker #3: I'll try to call back in. Sorry about that.

Gregory Miller: I'll try to call back in. Sorry about that.

Speaker #4: Okay. All right. Thank you.

Leslie D. Hale: Okay. All right.

Speaker #2: Thank you. Our next question comes from the line of Sydney Romey with Barclays. Please proceed.

Operator 2: Thank you. Our next question comes from the line of Sydney Romey with Barclays. Please proceed.

Operator: Thank you. Our next question comes from the line of Sydney Romey with Barclays. Please proceed.

Speaker #6: Hi, thanks very much for taking the question. You announced a $250 million share repurchase authorization earlier this year, so I was just wondering if you could give some color on how you're currently thinking about share repurchases relative to acquisitions or disposition activity.

Sydney Romey: Hi, thanks very much for taking the question. You announced a $250 million share repurchase authorization earlier this year. I was just kind of wondering if you could give some color on how you're currently thinking about share repurchases relative to acquisitions or disposition activity.

Speaker #4: Yeah, sure. Good afternoon. Well, look, we're always focused on optimizing the tools that we have to drive shareholder value. We're very pleased with where our balance sheet sits today, particularly after we have addressed our maturing bonds.

Leslie D. Hale: Yeah, sure. Good afternoon. Look, we're always focused on optimizing the tools that we have to drive shareholder value. We're very pleased with where our balance sheet sits today, particularly after we have addressed our maturing bonds most recently, and we have ample liquidity. The strong results that we are seeing from our high impact renovations and our conversions are delivering strong results, demonstrating the effectiveness of the investments we've made. Keep in mind, for our high impact renovations, we grew EBITDA by 50% this quarter. With our conversions, we grew EBITDA by 11%. We're excited about the next two conversions that we have down the pipe, and we're also excited about how The Atterbury is going to ramp up. At the same time, we continue to believe that our stock is undervalued.

Speaker #4: Most recently, we have ample liquidity. The strong results we are seeing from our high-impact renovations and our conversions are delivering strong results.

Speaker #4: We're demonstrating the effectiveness of the investments we've made. Keep in mind, for our grew EBITDA by 50% this quarter. If our conversions, we grew EBITDA by 11%.

Speaker #4: We're excited about the next two conversions that we have down the pipe, and we're also excited about how the Atterberry is going to ramp up.

Speaker #4: At the same time, we continue to believe that our stock is undervalued, and we remain constructive on the transaction side. We expect to continue to be active with dispositions.

Leslie D. Hale: We remain constructive on the transaction side, and we expect to continue to be active with dispositions. Our balance sheet gives us optionality to look at all of these tools and exercise them at the right window, and we're going to continue to be disciplined.

Speaker #4: And so, our balance sheet gives us optionality to look at all of these tools and exercise them at the right window. We're going to continue to be disciplined.

Speaker #6: Thanks very much.

Sydney Romey: Thanks very much.

Speaker #2: Thank you. Our next question comes from the line of Michael Herring with Green Street Capital. Please proceed.

Operator 2: Thank you. Our next question comes from the line of Michael Herring with Green Street Advisors. Please proceed.

Operator: Thank you. Our next question comes from the line of Michael Herring with Green Street Advisors. Please proceed.

Speaker #5: All right, thanks for taking the question. Just maybe speaking about the transaction market, we've seen pretty strong pricing at the top end of the market.

Michael Herring: Hi, thanks for taking the question. Just maybe speaking of the transaction market, we've seen pretty strong pricing at the top end of the market. I'm curious if you can discuss how pricing has evolved in the more select service or your segment of the business, and if that gives you more opportunity as a seller to effectuate transactions.

Speaker #5: I'm curious if you can discuss how pricing has evolved in the more select-service segment, or your segment of the business, and if that gives you more opportunity as a seller to effectuate transactions.

Speaker #4: Yeah. Look, I would say that we're in a market where pricing is an asset-by-asset, case-by-case basis. What I would say about the overall transaction market is that it's more constructive today.

Leslie D. Hale: Yeah. Look, I would say that we're in a market where pricing is an asset-by-asset, case-by-case basis. What I would say about the overall transaction market is that it's more constructive today, and that there are more transactions in the pipeline. I would say that the debt market continues to be very competitive with a number of capital providers. There's better fundamentals, which is allowing potential buyers to underwrite with more conviction. The buyer pool is widened today, particularly as the performance continues to improve. We're seeing owner-operators continue to play a role in the transaction market. We're also starting to see family offices and a little bit of private equity as well. It's still focused on single assets as opposed to portfolios.

Speaker #4: And that there are more transactions in the pipeline. I would say that the debt market continues to be very competitive, with a number of capital providers.

Speaker #4: There are better fundamentals, which is allowing potential buyers to underwrite with more conviction. The buyer pool is wider today, particularly as performance continues to improve.

Speaker #4: And we're seeing owner-operators continue to play a role in the transaction market. We're also starting to see family offices and a little bit of private equity as well.

Speaker #4: And so, it's still focused on single assets as opposed to portfolios. But we do see the overall transaction market improving. But I would generally say that we're starting to sort of see pricing converge.

Leslie D. Hale: We do see the overall transaction market improving, but I would generally say that we're starting to sort of see pricing converge, and it's really just a case-by-case basis in this climate. We recently sold, as you mentioned, an asset in Fremont. That was an asset where the dynamics of that market had moved away from its trajectory from the rest of what's happening in Northern California, and the pending capital didn't make sense for us. We ran a small process. We had a regional operator play a healthy multiple on that existing asset.

Speaker #4: And it's really just a case-by-case basis in this climate. We recently sold, as you mentioned, an asset in Fremont. That was an asset where the dynamics of that market had moved away from its trajectory compared to the rest of what is happening in Northern California.

Speaker #4: And the pending capital didn’t make sense for us. And so we ran a small process, and we had a regional operator pay a healthy multiple on that existing asset.

Speaker #5: Understood. And maybe just a follow-up on the conversion opportunities. I'm just curious to understand where you guys are with the wind-down in San Diego.

Michael Herring: Understood. Maybe just a follow-up on the conversion opportunities. I'm just curious to understand where you guys are with the Wyndham in San Diego, assuming the Margaritaville conversion doesn't preclude any conversion at that asset. Is there any advancement with that property or are there other conversion opportunities that you've identified in recent months?

Speaker #5: Assuming the Margaritaville conversion doesn't preclude any conversion at that asset, is there any advancement with that property, or are there other conversion opportunities that you've identified in recent months?

Speaker #4: I mean, we have a healthy pipeline of conversions. We have been, and continue to be, on pace to deliver two conversions per year.

Leslie D. Hale: We have a healthy pipeline of conversions. We have and continue to be on a pace of delivering two conversions per year. With the announcement of Key West, we are continuing down that path. Super excited about the Margaritaville, which I'm going to let Tom talk about. Related to your specific question on San Diego, what I would say is that we're making great progress on that asset and working with the port. We're in the process of executing our extension. Part of that process is around finalizing our design of the transformative repositioning of that asset. We expect to make meaningful progress through the balance of the remainder of the year in San Diego.

Speaker #4: And with the announcement of Key West, we are continuing down that path. Super excited about the Margaritaville, which I'm going to let Tom talk about.

Speaker #4: But related to your specific question on San Diego, what I would say is that we're making great progress on that asset and working with the port.

Speaker #4: We're in the process of executing our extension. Part of that process is around finalizing our design of the transformative repositioning of that asset.

Speaker #4: And we expect to make meaningful progress through the balance of the remainder of the year in San Diego.

Speaker #3: And just to give a little bit more color on Key West, because we're excited, obviously, to be making that announcement today. This is one of the highest ADR markets in the country.

Thomas Bardenett: Just to give a little bit more color on Key West, because we're excited obviously of making that announcement today. This is one of the highest ADR markets in the country, and it's the most iconic island destination if you think about South Florida. The origins of Key West are perfect for Margaritaville because that's where they opened their first store and restaurant a while ago. We're excited about bringing another asset into that lifestyle consumer that's attracted to that. As Leslie described in her prepared remarks, when you arrive at this hotel, you're going to have the opportunity to be greeted by the Provisions marketplace and gives everybody really a license to chill. The diverse food and beverage offerings, I think that's where Greg was probably going in regards to just, what are the deliverables of this Margaritaville?

Speaker #3: And it's the most iconic island destination if you think about South Florida. And the origins of Key West are perfect for Margaritaville because that's where they opened their first store and restaurant a while ago.

Speaker #3: So we're excited about bringing another asset into that lifestyle consumer that's attracted to that. And as Leslie described in her prepared remarks, when you arrive at this hotel, you're going to have the opportunity to be greeted by the Provisions Marketplace, and it gives everybody really a license to chill.

Speaker #3: The diverse food and beverage offerings—I think that's where Greg was probably going in regards to just what are the deliverables of this Margaritaville?

Speaker #3: It’s really like a sunny-side-up, complimentary, made-to-order breakfast in the morning. Then, when you’re getting into the afternoon, we’re really excited about a featured cabana bar called 5 O'Clock Somewhere, with an expanded pool and entertainment concept that really will elevate the experience.

Thomas Bardenett: It's really like a sunny side up, complimentary made to order breakfast in the morning. When you get into the afternoon, we're really excited about a featured cabana bar called Five O'Clock Somewhere, with an expanded pool and entertainment concept that really will elevate the experience. We're most excited about the fact that it's a family of brands. Margaritaville has done a great job with restaurants, resorts, vacation club, residential real estate, vacation homes, and even the cruise line that's a port of call going down to Key West.

Speaker #3: And so we're most excited about the fact that it's a family of brands. Margaritaville has done a great job with restaurants, resorts, vacation club, residential real estate, vacation homes, and even the cruise line that's a port of call going down to Key West.

Speaker #3: So we believe not only for our guests who will be coming in to enjoy it, but we think the locals will really enjoy the chance to have an opportunity to experience this hotel in Key West.

Thomas Bardenett: We believe not only for our guests who will be coming in to enjoy it, but we think the locals will really enjoy the chance to have an opportunity to experience this hotel in Key West, because there's really a lack of supply there, and we're really excited about the opportunity to grow rate and profitability at this asset.

Speaker #3: Because there's really a lack of supply there, we're very excited about the opportunity to grow rate and profitability at this asset.

Speaker #4: I would just add on that, obviously, Tom mentioned a number of thoughtful F&B ideas that we're going to be executing on within Margaritaville. But that's just a continuation of the strategy that we've had across all of our conversions.

Leslie D. Hale: I would just add on that, Tom mentioned a number of thoughtful F&B ideas that we're going to be executing on within Margaritaville. That's just a continuation of a strategy that we've had across all of our conversions. We talked about before Mills House, Mandalay Beach, and Santa Monica, all of which are contributing to the 7% out of room spend that we achieved this past quarter. Tom just mentioned what we're doing in Key West in terms of the pool bar. I remind you that in Boston, we're going to be opening The Archive, and in Pittsburgh, The Drafting Room, and the Fulton premium lounge that we're going to have there as well.

Speaker #4: We've talked before about Mills House, Mandalay Beach, and Santa Monica, all of which are contributing to the 7% out-of-room spend that we achieved this past quarter. Tom just mentioned what we're doing in Key West in terms of the pool bar.

Speaker #4: I remind you that in Boston, we're going to be opening The Archive. And in Pittsburgh, the Drafting Room and the Fulton Premium Lounge that we're going to have there as well.

Speaker #4: All of these executions are aligned with our strategy of being able to have thoughtful F&B that's beverage-centric, and that not only attracts guests that are in our hotel, but also guests that are outside of our hotel.

Leslie D. Hale: All of these executions are aligned with our strategy of being able to have thoughtful F&B that's beverage centric, and that not only attracts guests that are in our hotel, but it also guests that are outside of our hotel. That's contributing to the strong out of room spend that we've had for six consecutive quarters now.

Speaker #4: And that's contributing to the strong out-of-room spend that we've had for consecutive quarters now.

Speaker #5: I appreciate the thought. Thank you.

Michael Herring: Appreciate the thoughts. Thank you.

Speaker #2: Thank you. Our next question comes from the line of Floris van Dinkum with Ladenburg Thalmann. Please proceed.

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

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

Speaker #3: Hey, I'm excited to go test out your Margaritaville offering once it gets completed. I'm just curious—can you quantify the capital that you plan to spend?

Floris van Dijkum: Hey. I'm excited to go test out your Margaritaville offering once it gets completed. I'm just curious, can you quantify the capital that you plan to spend? I think you've historically averaged something along the lines of north of 20% returns on those conversion projects. Maybe if you can give us a little bit more of the financial impact and how much, because Margaritaville assets are unique and particularly their alcohol sales are just off the charts. How much are you factoring in there, and how will this asset compete with the DiamondRock Hotel that's not that far away, that's also a Margaritaville?

Speaker #3: And I think you've historically averaged something along the lines of north of 20% returns on those conversion projects. Maybe you can give us a little bit more of the financial impact.

Speaker #3: And how much, because Margaritaville assets are unique—particularly their alcohol sales, which are just off the charts—how much are you factoring in there?

Speaker #3: And how will this asset compete with the Diamond Rock Hotel that's not that far away, that's also a Margaritaville?

Speaker #4: Yeah, I would generally say that the way that we sort of thought about the returns is as a function of return on the capital that we're putting in that's incremental to convert the assets.

Leslie D. Hale: I would generally say that the way that we sort of thought about the returns is a function of the return on the capital that we're putting in that's incremental in order to convert the assets. We generally have achieved returns that are north of 40% relative to the incremental capital. What I would also say is we've also pointed out the EBITDA growth across the assets. We've talked about previously in Boston, we think there's 40% upside in the EBITDA of that asset. I would say in Key West, we think there's about a 50% upside in the EBITDA of that asset, given that Tom mentioned sort of how high rated that market is and the opportunity to up brand this particular asset. I would say also in Pittsburgh, we think there's 35% upside in that EBITDA.

Speaker #4: We have generally achieved returns that are north of 40% relative to the incremental capital. But I would also say we've pointed out the EBITDA growth across the assets.

Speaker #4: We've talked about previously in Boston, we think there's 40% upside in the EBITDA of that asset. I would say in Key West, we think there's about a 50% upside in the EBITDA of that asset given the high that Tom mentioned—sort of how high-rated that market is—and the opportunity to upbrand in this particular asset.

Speaker #4: I would say also, in Pittsburgh, we think there's 35% upside in that EBITDA, and keep in mind the growth rates that we've demonstrated on the seven assets we've already completed.

Leslie D. Hale: Keep in mind the growth rates that we've demonstrated on the seven assets we've already completed. We feel very good about the return on the capital that we're investing in these assets.

Speaker #4: So we feel very good about the return on the capital that we're investing in these assets.

Speaker #3: And Flores, I know we've spent some time in Key West, so you know exactly where the location is. It's on the way to Duval, where a lot of the activity is.

Thomas Bardenett: Floris, I know we've spent some time in Key West, so you know exactly where the location is. It's on the way to Duval, where a lot of the activity is. We truly believe, understanding the island experience, and to your point about the other Margaritaville, we think we'll be able to tuck underneath based on our location compared to the other one. Most importantly, because of the experience we're going to have around the pool as well as the beverage experience, we think locals are going to be really attracted to this, because there's just not a lot of supply, which is why the average rate, if you can believe it, almost mirrors New York City's average rates in regards to what happens down here on an annual basis.

Speaker #3: And we truly believe understanding the island experience—and to your point about the other Margaritaville—we think we'll be able to tuck underneath, based on our location compared to the other one.

Speaker #3: And most importantly, because of the experience we're going to have around the pool as well as the beverage experience, we think locals are going to be really attracted to this because there's just not a lot of supply. Which is why the average rate, if you can believe it, almost mirrors New York City's average rates in regards to what happens down here.

Speaker #3: On an annual basis. So we're pleased to know that this can take us to a different level within the lifestyle consumer, and certainly Margaritaville is what everybody Googles when you go to Key West in regards to the atmosphere and what you're looking for.

Thomas Bardenett: We're pleased to know that this can take us to a different level within the lifestyle consumer, and certainly Margaritaville is what everybody Googles when you go to Key West in regards to the atmosphere and what you're looking for.

Speaker #1: No, I'm looking forward to my next trip out there with you, Tom, because I think it'll be fun. But to the point about Anne, Leslie, I appreciate your returns have been exceptionally high on these redevelopments.

Floris van Dijkum: No, I'm looking forward to my next trip out there with you, Tom, because I think it'll be fun. To the point about, Leslie, I appreciate your returns have been exceptionally high on these redevelopments. Is there any thought from you to do more than two projects a year because frankly, the returns are so attractive?

Speaker #1: Is there any thought from you to do more than two projects a year? Because, frankly, the returns are so attractive.

Speaker #4: Yeah, I would say we have tried to be thoughtful to make sure that we manage the displacement that's caused by these renovations. We also look at the catalyst behind the franchise exploration.

Leslie D. Hale: Yeah, I would say, we have tried to be thoughtful to make sure that we manage the displacement that's caused by these renovations. We also look at the catalyst behind the franchise expiration, like such is the case in Key West. We have to time it according to a couple factors that we're balancing, Floris. We think that two to three is the right cadence.

Speaker #4: Such is the case in Key West, and so we have to time it according to a couple of factors that we're balancing, Flores. But we think that two to three is the right cadence.

Speaker #1: Thanks.

Floris van Dijkum: Thanks.

Speaker #2: Thank you. Our next question comes from the line of Chris Woronka with Deutsche Bank. Please proceed.

Operator 2: Thank you. Our next question comes from the line of Chris Woronka with Deutsche Bank. Please proceed.

Operator: Thank you. Our next question comes from the line of Chris Woronka with Deutsche Bank. Please proceed.

Speaker #6: Hey, good afternoon, everyone. Thanks for taking the questions. There's been a lot of focus across the hotel REITs during earnings season about costs. You guys provided some similarly directional commentary, I think, to your peers. And Leslie, I think you mentioned that in the second half you're going to continue to build up occupancy and maybe be a little bit more slanted toward occupancy on the RevPAR part.

Chris Woronka: Hey, good afternoon, everyone. Thanks for taking the questions. There's been a lot of focus across the hotel REITs this earnings season about costs. You guys provided kind of some similarly directional commentary, I think, to your peers. Leslie, I think you mentioned that H2, you're going to continue to build OC and maybe be a little bit more slanted toward OC on the RevPAR. The question is the industry maybe falling behind a little bit on rate again? There's been some nice gains, but it seems like expenses are pretty stubborn, and when we get more OC, we get more labor. Do you think there's some kind of delayed catch up in rates coming as you look out? Do you see in your maybe two, three quarters out what you're booking now, do you see another jump up in room rates? Thanks.

Speaker #6: So the question is, is the industry maybe falling behind a little bit on rate again? There have been some nice gains, but it seems like expenses are pretty stubborn.

Speaker #6: And when we get more occupancy, we get more labor. Do you think there's some kind of delayed catch-up in rates coming as you look out?

Speaker #6: Do you see in your maybe two, three quarters out—what you're booking now—do you see another jump up in room rates? Thanks.

Speaker #4: Yeah, look, I would say that rate has been relatively healthy, and we've seen meaningful rate growth over the last several quarters. I think from our perspective, we're really focused on growing the bottom line.

Leslie D. Hale: Yeah. Look, I would say that rate has been relatively healthy, and we've seen meaningful rate growth over the last several quarters. I think from our perspective, we're really focused on growing the bottom line. There's lots of ways to achieve that. Keep in mind, we grew the bottom line by 7% this quarter for the second consecutive quarter. Our strategy is sort of broad based. We've been aligning that against focusing on capturing consumer demand trends in the lifestyle-oriented segment. We've been really thoughtful around our revenue management and balancing between rate and OC. Keep in mind that occupancy means higher demand, and higher demand helps your out-of-room spend, which again, that we've seen strong growth in out-of-room spend for several consecutive quarters. We think that our mix is aligned with the strategy that we've been focused on.

Speaker #4: There are lots of ways to achieve that. Keep in mind, we grew the bottom line by 7% this quarter, for the second consecutive quarter. Our strategy is sort of broad-based.

Speaker #4: We've been aligning that against focusing on capturing consumer demand trends and the lifestyle-oriented segment. We've been really thoughtful around our revenue management and balancing between rate and occupancy. Keep in mind that occupancy means higher demand, and higher demand helps your auto room spend, which again, we've seen strong growth in our auto room spend for several consecutive quarters.

Speaker #4: And so we think that our mix is aligned with the strategy that we've been focused on.

Speaker #6: Okay, helpful. And then I think you are now down to two highest-place hotels after the sale of Fremont. But I know there's been some changes at Hyatt, and I know there's been kind of a strategy to have the select brand on top of that, or as a solution. So, is there going to be any changes in your Hyatt portfolio that you see coming that are maybe related to CapEx or positioning?

Chris Woronka: Okay. Helpful. I think you are now down to 2 Hyatt Place hotels after the sale of Fremont. I know there's been some changes at Hyatt, and I know they're kind of the strategy to have a select brand on top of that or as a solution to Is there going to be any changes in your Hyatt portfolio that you see coming that are maybe related to CapEx or positioning?

Speaker #4: Yeah, I mean, look, our decision to sell a couple of assets has nothing to do with the Hyatt brand. We believe in the Hyatt brand—it has produced for us for many years. In this particular case, it was just that the market had moved away from the demand of that particular hotel relative to what we're seeing across the rest of Northern California.

Leslie D. Hale: Yeah. Look, our decision to sell a couple of assets has nothing to do with the Hyatt brand. We believe in the Hyatt brand. It has produced for us for many years. In this particular case, it was just the market had moved away from the demand of that particular hotel relative to what we're seeing across the rest of Northern California. When we looked at the capital and the potential return on those capitals, it didn't align with our view on a go-forward basis, and it was the right thing to do for us. It has nothing to do with the Hyatt brand. We are good partners with Hyatt and believe in the value that their brands bring.

Speaker #4: And so, when we looked at the capital and the potential return on those capitals, it didn't align with our view on a go-forward basis, and it was the right thing to do for us.

Speaker #4: But that has nothing to do with the Hyatt brand. We are good partners with Hyatt and believe in the value that their brands bring.

Speaker #3: An example of that, Chris—as you know, we have a good footprint in Silicon Valley, and both our Hyatt Houses in Santa Clara and San Jose have had great numbers.

Thomas Bardenett: An example of that, Chris, as you know, we have a good footprint in Silicon Valley, and both our Hyatt Houses in Santa Clara and San Jose have had great numbers. Obviously, we're right across from Santa Clara, where they held the Super Bowl, as well as many concerts. We love those locations and the contribution that we get from Hyatt, in addition to the other asset in Palo Alto. We really love certain markets within Silicon Valley. This just happened to be a market that we believe was not going to recover to the same degree that our other ones did.

Speaker #3: Obviously, we're right across from Santa Clara, where they held the Super Bowl as well as many concerts. We love those locations and the contribution that we get from Hyatt.

Speaker #3: In addition to the other asset in Palo Alto. And so, we really love certain markets within Silicon Valley. This just happened to be a market that we believe was not going to recover to the same degree that our other ones did.

Speaker #6: Okay. Very good. Thanks, Tom. Thanks, Leslie.

Chris Woronka: Okay. Very good. Thanks, Tom. Thanks, Leslie.

Operator 2: Thank you. There are no further questions at this time. I'd like to turn the floor back over to Leslie Hale for closing remarks.

Operator: Thank you. There are no further questions at this time. I'd like to turn the floor back over to Leslie Hale for closing remarks.

Speaker #2: Thank you. There are no further questions at this time. I'd like to turn the floor back over to Leslie Hale for closing remarks.

Speaker #7: Thank you, everybody, for joining us. We hope that everyone has a great summer, and we look forward to seeing you all in the fall.

Leslie D. Hale: Thank you everybody for joining us. We hope that everybody has a great summer, and we look forward to seeing you guys in the fall.

Operator 2: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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

Q2 2026 RLJ Lodging Trust Earnings Call

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