Q2 2026 Summit Hotel Properties Inc Earnings Call

August 6, 2026

Speaker #1: Ladies and gentlemen, thank you for standing by. My name is Duncan, and I will be your conference operator for today. I would like to welcome you to Summit Hotel Properties Q2 earnings call.

Operator: Ladies and gentlemen, thank you for standing by. My name is Duncan, and I will be your conference operator for today. I would like to welcome you to Summit Hotel Properties' Q2 earnings call. All lines have been placed on mute to prevent any background noise. Now I'd like to turn the conference over to Kevin Milota, Senior Vice President, Corporate Finance. Please go ahead.

Operator: Ladies and gentlemen, thank you for standing by. My name is Duncan, and I will be your conference operator for today. I would like to welcome you to Summit Hotel Properties' Q2 Earnings Call. All lines have been placed on mute to prevent any background noise. Now I'd like to turn the conference over to Kevin Milota, Senior Vice President, Corporate Finance. Please go ahead.

Speaker #1: All lines have been placed on mute to prevent any background noise. Now, I'd like to turn the conference over to Kevin Milota, Senior Vice President Corporate Finance.

Speaker #1: Please go ahead.

Speaker #2: Thank you, operator, and good morning. I'm joined today by Summit Hotel Properties President and Chief Executive Officer, Jon Stanner, and Adam Waddell, Executive Vice President, Corporate Development.

Kevin Milota: Thank you operator. Good morning. I'm joined today by Summit Hotel Properties President and Chief Executive Officer Jon Stanner, and Adam Wudel, Executive Vice President, Corporate Development. Please note that many of our comments today are considered forward-looking statements as defined by federal securities laws. These statements are subject to risks and uncertainties, both known and unknown, as described in our SEC filings. Forward-looking statements that we make today are effective only as of today, 6 August 2026. We undertake no duty to update them later. You can find copies of our SEC filings in an earnings release, which contain reconciliations to non-GAAP financial measures referenced on this call on our website at www.shpret.com. Please welcome Summit Hotel Properties President and Chief Executive Officer Jon Stanner.

Speaker #2: Please note that many of our comments today are considered forward-looking statements as defined by federal securities laws. These statements are subject to risks and uncertainties, both known and unknown, as described in our SEC filings.

Speaker #2: Forward-looking statements that we make today are effective only as of today. August 6, 2026, and we undertake no duty to update them later. You can find copies of our SEC filings in our earnings release, which contain reconciliations to non-GAAP financial measures referenced on this call.

Speaker #2: On our website at www.shpreet.com. Please welcome Summit Hotel Properties President and Chief Executive Officer, Jon Stanner.

Speaker #3: Thank you, Kevin, and good morning, everyone. Thank you for joining us today for our Q2 2026 earnings conference call. On today's call, we will discuss our terrific Q2 results and our improved outlook for the remainder of the year.

Jon Stanner: Thank you, Kevin, and good morning, everyone. Thank you for joining us today for our Q2 2026 earnings conference call. On today's call, we will discuss our terrific Q2 results and our improved outlook for the remainder of the year that together are driving an increase to our full year guidance ranges. We will also highlight the continued success we have had selling assets, recycling capital, enhancing the overall quality of our portfolio, and strengthening our balance sheet. Operating fundamentals were strong in Q2, exceeding our expectations going into the quarter as pro forma RevPAR increased 5% year-over-year, driven by a robust 7.1% increase in average daily rate. We were particularly pleased with the breadth of demand we saw across both segments and markets.

Jon Stanner: Thank you, Kevin, and good morning, everyone. Thank you for joining us today for our Q2 2026 Earnings Conference Call. On today's call, we will discuss our terrific Q2 results and our improved outlook for the remainder of the year that together are driving an increase to our full year guidance ranges. We will also highlight the continued success we have had selling assets, recycling capital, enhancing the overall quality of our portfolio, and strengthening our balance sheet. Operating fundamentals were strong in Q2, exceeding our expectations going into the quarter as pro forma RevPAR increased 5% year-over-year, driven by a robust 7.1% increase in average daily rate. We were particularly pleased with the breadth of demand we saw across both segments and markets.

Speaker #3: That together, are driving an increase to our full-year guidance ranges. We will also highlight the continued success we have had selling assets, recycling capital, enhancing the overall quality of our portfolio, and strengthening our balance sheet.

Speaker #3: Operating fundamentals were strong in the Q2, exceeding our expectations going into the Q2, as pro forma repar increased 5% year over year. Driven by a robust 7.1% increase in average daily rate.

Speaker #3: We were particularly pleased with the breadth of demand we saw across both segments and markets. Hotel Ibiza and our pro forma portfolio increased 7.8% in the Q2, resulting in nearly 90 basis points of margin expansion.

Jon Stanner: Hotel EBITDA in our pro forma portfolio increased 7.8% in the quarter, resulting in nearly 90 basis points of margin expansion as rate driven RevPAR growth and ongoing strong cost controls drove healthy profitability growth. Adjusted EBITDAre increased 7.7% to $54.8 million, and adjusted FFO increased 6.7% to $34.9 million, or $0.29 per share in Q2. The positive inflection in demand trends we first began to see in March of this year accelerated into Q2 and continued through July. More specifically, strengthening business transient and group demand is driving robust midweek performance, particularly in urban markets, as average daily rate in our urban portfolio increased 9% in Q2, driving an 8% increase in RevPAR growth and 12% increase in hotel EBITDA.

Speaker #3: As rate-driven repar growth and ongoing strong cost controls drove healthy profitability growth. Adjusted EBITDA-RE increased 7.7% to $54.8 million. And adjusted FFO increased 6.7% to $34.9 million.

Speaker #3: Or $29 cents per share in the Q2. The positive inflection in demand trends we first began to see in March of this year accelerated into the Q2 and continued through July.

Speaker #3: More specifically, strengthening business transient and group demand is driving robust midweek performance. Particularly in urban markets, as average daily rate in our urban portfolio increased 9% in the Q2, driving an 8% increase in repar growth and 12% increase in hotel EBITDA.

Speaker #3: We believe the accelerating urban recovery is reflective of a broader, durable trend as corporate travel budgets are growing and group meetings remain a priority.

Jon Stanner: We believe the accelerating urban recovery is reflective of a broader durable trend as corporate travel budgets are growing and group meetings remain a priority. In particular, we have seen relative recent strength in smaller group performance, both corporate and SMERF business, which will directly benefit our types of hotels. The vast majority of our urban markets saw meaningful RevPAR and EBITDA growth in the quarter. Markets outside of World Cup host markets were some of our top performers, including Cleveland, Washington, DC, Indianapolis, Chicago, Charlotte, and New Orleans. Our urban portfolio comprises approximately half of our total rooms in hotel EBITDA, and the positive momentum we are experiencing in this location type bodes well for our future growth.

Speaker #3: In particular, we have seen relative recent strength in smaller group performance, both corporate and Smurf business, which will directly benefit our types of hotels.

Speaker #3: The vast majority of our urban markets saw meaningful repar in EBITDA growth in the Q2, in markets outside of World Cup host markets where some of our top performers.

Speaker #3: Including Cleveland, Washington, D.C., Indianapolis, Chicago, Charlotte, and New Orleans. Our urban portfolio comprises approximately half of our total rooms and hotel EBITDA. And the positive momentum we are experiencing in this location type, bodes well for our future growth.

Speaker #3: Our highest-rated demand segments continue to be our best-performing segments, as retail RevPAR increased 10%, corporate negotiated RevPAR increased 7.5%, and group RevPAR increased nearly 15% in Q2.

Jon Stanner: Our highest rated demand segments continue to be our best performing segments as retail RevPAR increased 10%, corporate negotiated RevPAR increased 7.5%, and group RevPAR increased nearly 15% in the quarter. These results were even better when we isolate performance to midweek and in urban locations. Retail negotiated and group RevPAR all increased greater than 15% in urban locations during the quarter. We also continue to benefit from the gradual recovery in government-related demand, as transient government revenue increased 8.3% year-over-year, after being a meaningful headwind for much of the last year. While the government segment remains well below historical levels, accelerating demand patterns are expected to continue in H2. Collectively, these trends support the narrative that the recent re-acceleration in industry fundamentals is increasingly being driven by multiple demand segments across a wide variety of markets.

Speaker #3: These results were even better when we isolate performance to midweek and in urban locations. Retail negotiated and group repar all increased greater than 15% in urban locations during the Q2.

Speaker #3: We also continue to benefit from the gradual recovery in government-related demand, as transient government revenue increased 8.3% year over year, after being a meaningful headwind for much of the last year.

Speaker #3: While the government segment remains well below historical levels, accelerating demand patterns are expected to continue in the back half of the year. Collectively, these trends support the narrative that the recent re-acceleration in industry fundamentals is increasingly being driven by multiple demand segments across a wide variety of markets.

Speaker #3: While our portfolio clearly benefited from terrific pricing of power around World Cup games, importantly, demand strength was broad-based across our portfolio. As nine of our markets achieved 10% repar growth or greater in the Q2.

Jon Stanner: While our portfolio clearly benefited from terrific pricing of power around World Cup games, importantly, demand strength was broad-based across our portfolio, as nine of our markets achieved 10% RevPAR growth or greater in Q2. RevPAR growth in our non-FIFA markets increased 4.2% in the quarter, which highlights the strength in demand we are seeing outside of special events. RevPAR growth was positive each month of the quarter, with April and May up 4.5% and 1% respectively, and June accelerated to nearly 10% growth as World Cup-related demand and strong citywide calendars supported outsized ADR gains. The World Cup was a meaningful contributor to our June results, particularly our ability to drive premium pricing around game days.

Speaker #3: Repar growth in our non-FIFA markets increased 4.2% in the Q2, which highlights the strength in demand we are seeing outside of special events. Repar growth was positive each month of the Q2, with April and May up 4.5% and 1% respectively, and June accelerated to nearly 10% growth, as World Cup-related demand and strong citywide calendars supported outsized ADR gains.

Speaker #3: The World Cup was a meaningful contributor to our June results, particularly our ability to drive premium pricing around game days. Across our six FIFA host markets, June repar increased nearly 19% over last year.

Jon Stanner: Across our six FIFA host markets, June RevPAR increased nearly 19% over last year, which exceeded our expectations coming into the event. Atlanta, Dallas, and San Francisco were our top performing World Cup markets in June, all achieving RevPAR growth of over 20% for the month, with hotel EBITDA increasing 43% year-over-year on a combined basis. We estimate that World Cup demand added approximately 100 basis points to our RevPAR growth in Q2. More importantly, as I mentioned, World Cup pricing power only amplified strong underlying trends across our portfolio as RevPAR growth in our non-FIFA markets increased nearly 5% in June. We are also encouraged by a notable lengthening of the booking window in Q2.

Speaker #3: Which exceeded our expectations coming into the event. Atlanta, Dallas, and San Francisco were our top-performing World Cup markets in June, all achieving repar growth of over 20% for the month, with Hotel EBITDA increasing 43% year over year on a combined basis.

Speaker #3: We estimate that World Cup demand added approximately 100 basis points to our repar growth in the Q2. More importantly, as I mentioned, World Cup pricing power only amplified strong underlying trends across our portfolio, as repar growth in our non-FIFA markets increased nearly 5% in June.

Speaker #3: We are also encouraged by a notable lengthening of the booking window in the Q2. Bookings made 30-plus days out increased 6% year over year and 18% compared to the Q1, while bookings made 15-plus days out increased over 300 basis points for the Q1.

Jon Stanner: Bookings made 30-plus days out increased 6% year-over-year and 18% compared to Q1, while bookings made 15-plus days out increased over 300 basis points for Q1. Conversely, in the week-for-the-week bookings declined 3% and 6% year-over-year and quarter-over-quarter, respectively. This was not just a World Cup phenomenon, as these statistics are similar in both our FIFA and non-FIFA markets. The lengthening of the booking window is an encouraging trend we view as a leading indicator of demand durability. Total revenue in our pro forma portfolio increased 5.2% in Q2, supported by continued strength in out-of-room spending. Non-rooms revenue increased 4.9% during the quarter, driven primarily by resort and destination fees, parking, and food and beverage revenue growth.

Speaker #3: Conversely, in week 4, bookings declined 3% and 6% year over year and quarter over quarter, respectively. This was not just a World Cup phenomenon, as these statistics are similar in both our FIFA and non-FIFA markets.

Speaker #3: The lengthening of the booking window is an encouraging trend we view as a leading indicator of demand durability. Total revenue in our pro forma portfolio increased 5.2% in the Q2, supported by continued strength in out-of-room spending.

Speaker #3: Non-rooms revenue increased 4.9% during the Q2, driven primarily by resort and destination fees, parking, and food and beverage revenue growth. As we've discussed on previous calls, our transformational renovation of the Oceanside Fort Lauderdale Resort continues to drive tremendous increased 31% compared to the Q2 of last year, resulting in a nearly 80% increase in hotel EBITDA.

Jon Stanner: As we've discussed on previous calls, our transformational renovation of the Oceanside Fort Lauderdale Resort continues to drive tremendous growth as total revenue for the hotel increased 31% compared to Q2 of last year, resulting in a nearly 80% increase in hotel EBITDA. Once again, our operating team did a tremendous job controlling expenses and driving strong profitability growth from rate-driven RevPAR growth during the quarter. Total operating expenses increased 4% year-over-year on difficult comparisons to last year. Pro forma hotel EBITDA increased 8% in Q2, representing a healthy 54% flow through on incremental revenue. Total labor costs increased 4.3% year-over-year, reflecting modest wage growth, higher incentive compensation associated with improved hotel level performance, and increases in hotel employee benefit costs.

Speaker #3: Once again, our operating teams did a tremendous job controlling expenses and driving strong profitability growth from rate-driven repar growth during the Q2. Total operating expenses increased 4% year over year on difficult comparisons to last year.

Speaker #3: Pro forma hotel EBITDA increased 8% in the Q2, representing a healthy 54% flow-through on incremental revenue. Total labor cost increased 4.3% year over year, reflecting modest wage growth, higher incentive compensation associated with improved hotel-level performance, and increases in hotel employee benefit cost.

Speaker #3: Contract labor declined another 4% versus the prior year, continuing the favorable trend we have discussed over the last several quarters. Overall, the labor environment remains stable, as turnover continues to be well below what we experienced in prior years.

Jon Stanner: Contract labor declined another 4% versus the prior year, continuing the favorable trend we have discussed over the last several quarters. Overall, the labor environment remains stable as turnover continues to be well below what we experienced in prior years. For the full year, we forecast hotel operating expenses to increase approximately 3% and expect to be able to continue to drive strong flow through in the H2. We also made meaningful progress strengthening the balance sheet during the quarter. In June, we refinanced our primary corporate credit facility with a new $650 million senior unsecured facility, extending the maturity date of the facility to June 2031, and lowering our borrowing costs by 20 basis points at our current leverage point.

Speaker #3: For the full year, we forecast hotel operating expenses to increase approximately 3% and expect to be able to continue to drive strong flow-through in the second half of the year.

Speaker #3: We also made meaningful progress strengthening the balance sheet during Q2. In June, we refinanced our primary corporate credit facility with a new $650 million senior unsecured facility, extending the maturity date of the facility to June 2031 and lowering our borrowing costs by 20 basis points at our current leverage point.

Speaker #3: In addition, in May, we amended the mortgage loan encumbering our AC and element Miami Brickell Hotels to reduce the interest rates read by 30 basis points.

Jon Stanner: In May, we amended the mortgage loan encumbering our AC & Element Miami Brickell hotels to reduce the interest rate spread by 30 basis points. When accounting for our swap portfolio, approximately 50% of our pro rata share of debt is fixed, and including our three Series of preferred stock, we are over 60% fixed on a pro rata basis. The overall health of our balance sheet is strong, as we currently have significant corporate liquidity with nothing outstanding on our revolving credit facility and no debt maturities until 2028, giving us flexibility to pursue a variety of value creation opportunities going forward. We also continue to successfully sell assets and recycle capital.

Speaker #3: When accounting for our swap portfolio, approximately 50% of our pro-rata share of debt is fixed, and including our three series of preferred stock, we are over 60% fixed on a pro-rata basis.

Speaker #3: The overall health of our balance sheet is strong, as we currently have significant corporate liquidity with nothing outstanding on our revolving credit facility and no debt maturities until 2028, giving us flexibility to pursue a variety of value creation opportunities going forward.

Speaker #3: We also continue to successfully sell assets and recycle capital. In late July, we closed on the previously announced sale of our wholly-owned courtyard and residence in Dallas, Arlington South Hotels, for a combined sale price of $19 million.

Jon Stanner: In late July, we closed on the previously announced sale of our wholly owned Courtyard and Residence Inn Dallas Arlington South hotels for a combined sale price of $19 million. We strategically retained ownership of those hotels through the FIFA demand window before closing the transaction which allowed us to capture robust event-driven demand in the Arlington sub-market prior to disposition. The two hotels achieved combined RevPAR growth of over 45% and EBITDA growth of nearly 85% in the month of June. The sale price represented a 5.4% capitalization rate based on trailing 12-month net operating income as of 31 May, prior to FIFA-related demand. We eliminated $7.6 million of near-term capital needs at the two hotels.

Speaker #3: We strategically retained ownership of those hotels through the FIFA demand window before closing the transaction, which allowed us to capture robust event-driven demand in the Arlington submarket prior to disposition.

Speaker #3: The two hotels achieved combined RevPAR growth of over 45% and EBITDA growth of nearly 85% in the month of June. The sale price represented a 5.4% capitalization rate, based on trailing 12-month net operating income as of May 31st, prior to FIFA-related demand.

Speaker #3: And we eliminated 7.6 million dollars of near-term capital need at the two hotels. This transaction reflects our ongoing commitment to recycling capital out of lower-growth assets and assets with outsized capital needs, and redeploying proceeds to strengthen the balance sheet, increase liquidity, and enhance the quality of our portfolio.

Jon Stanner: This transaction reflects our ongoing commitment to recycling capital out of lower growth assets and assets with outsized capital needs, and redeploying proceeds to strengthen the balance sheet, increase liquidity, and enhance the quality of our portfolio. Since 2023, the company has sold 15 hotels for nearly $220 million at a blended capitalization rate of less than 5% and eliminated nearly $70 million of capital requirements. The combined RevPAR for the sold hotels was $86, which is an approximate 30% discount to our current pro forma portfolio. The hotel transaction environment is improving as we have seen a notable recent pickup in activity. During the Q2, we repurchased approximately 49,000 common shares at a weighted average price of $4.27 per share. Including our repurchase activity in the Q1, through 30 June, we repurchased 1.5 million shares for $6.2 million, or a weighted average price of $4.17 per share.

Speaker #3: Since 2023, the company has sold 15 hotels for nearly $220 million. At a blended capitalization rate of less than 5%, and eliminated nearly 70 million dollars of capital requirements.

Speaker #3: The combined repar for the sold hotels was $86, which is an approximate 30% discount to our current pro forma portfolio. The hotel transaction environment is improving, as we have seen a notable recent pickup in activity.

Speaker #3: During the Q2, we repurchased approximately 49,000 common shares, at a weighted average price of $4.27 per share. Including our repurchase activity in the Q1, through June 30th, we repurchased 1.5 million shares for $6.2 million, or a weighted average price of $4.17 per share.

Speaker #3: And since the inception of the program, we've repurchased 5.1 million shares, which represents over 4% of total shares and units outstanding, for $21.6 million, at an average price of $4.26 per share.

Jon Stanner: Since the inception of the program, we’ve repurchased 5.1 million shares, which represents over 4% of total shares and units outstanding, for $21.6 million at an average price of $4.26 per share. On 28 July 2026, our board of directors declared a quarterly common dividend of $0.08 per share, representing an annualized dividend yield of approximately 4.6% based on the 4 August closing stock price. The board also declared the regularly quarterly dividends on our Series E, Series F, and Series Z preferred securities. The current common dividend continues to represent a modest payout ratio relative to trailing 12-month AFFO and reflects our ongoing objective of balancing shareholder returns with reinvestment and balance sheet discipline. Turning to our outlook for the remainder of the year.

Speaker #3: On July 28th, 2026, our board of directors declared a quarterly common dividend of $0.08 per share. Representing an annualized dividend yield of approximately 4.6% based on the August 4th closing stock price.

Speaker #3: The board also declared the regularly quarterly dividends on our Series E, Series F, and Series Z preferred securities. The current common dividend continues to represent a modest payout ratio relative to trailing 12-month AFFO, and reflects our ongoing objective of balancing shareholder returns with reinvestment and balance sheet discipline.

Speaker #3: Turning to our outlook for the remainder of the year, in our earnings press release yesterday, we increased our full-year guidance ranges for repar growth, adjusted EBITDA RE, adjusted FFO, and FFO per share.

Jon Stanner: In our earnings press release yesterday, we increased our full year guidance ranges for RevPAR growth, adjusted EBITDAre, adjusted FFO, and FFO per share. For the full year, we now expect pro forma RevPAR growth of 1.75% to 3.25%, an increase of 75 basis points at the midpoint. Adjusted EBITDAre of $175 million to 182 million. Adjusted FFO of $95.5 million to 103 million, and adjusted FFO per share of $0.79 to $0.85. As a reminder, our previous RevPAR growth, EBITDA, and FFO ranges included the ownership of the recently sold Courtyard and Residence Inn Arlington hotels, which were expected to contribute approximately $500,000 in the last 5 months of 2026. This contribution has been removed, and the revised midpoints of our EBITDA and FFO per share ranges are increasing $3.5 million and $0.02 per share respectively, after adjusting for these asset sales.

Speaker #3: For the full year, we now expect pro forma repar growth of 1.75% to 3.25%, an increase of 75 basis points at the midpoint. Adjusted EBITDA RE of $175 million to $182 million.

Speaker #3: Adjusted FFO of $95.5 million to $103 million. And adjusted FFO per share of $79 to $85. As a reminder, our previous repar growth EBITDA and FFO ranges included the ownership of the recently sold courtyard and residence in Arlington Hotels, which we're expected to contribute approximately $500,000 in the last five months of 2026.

Speaker #3: This contribution has been removed, and the revised midpoints of our EBITDA and FFO per share ranges are increasing 3.5 million dollars and 2 cents per share, respectively, after adjusting for these asset sales.

Speaker #3: Approximately $2 million of our EBITDA guidance increase is the result of stronger-than-expected Q2 results, while the remaining 1.5 million dollars reflects our higher expectations for the second half of the year.

Jon Stanner: Approximately $2 million of our EBITDA guidance increase is the result of stronger than expected Q2 results, while the remaining $1.5 million reflects our higher expectations for the H2 of the year. Operating trends have continued to improve into the Q3, as preliminary July RevPAR growth is expected to finish at approximately 6%. We expect full year 2026 hotel EBITDA margins to range from down 25 basis points to up 25 basis points, or essentially flat at the midpoint, which includes approximately 25 basis points of headwinds from higher property taxes. We believe the revised ranges appropriately reflect both the better than expected results we achieved in the Q2 and the more favorable outlook we have for the balance of the year, while remaining mindful that the operating environment is dynamic and our long-term visibility remains limited.

Speaker #3: Operating trends have continued to improve into the Q3, as preliminary July repar growth is expected to finish at approximately 6%. We expect full-year 2026 hotel EBITDA margins to range from down 25 basis points to up 25 basis points, or essentially flat at the midpoint, which includes approximately 25 basis points of headwinds from higher property taxes.

Speaker #3: We believe the revised ranges appropriately reflect both the better-than-expected results we achieved in the Q2 and the more favorable outlook we have for the balance of the year.

Speaker #3: Our remaining mindful that the operating environment is dynamic and our long-term visibility remains limited. We expect pro rata interest expense excluding the amortization of deferred financing costs to be $58 million, to $62 million, and preferred distributions including the Series E, Series F, and Series Z securities to be $18.5 million.

Jon Stanner: We expect pro rata interest expense, excluding the amortization of deferred financing costs, to be $58 million to 62 million, and preferred distributions, including the Series E, Series F, and Series Z securities, to be $18.5 million. There are no additional acquisitions, dispositions, share repurchases, or capital markets activities assumed in the company’s full year outlook beyond those already reflected as of 5 August 2026. From a capital expenditure perspective, our guidance assumes pro rata capital expenditures range between $55 million to 65 million for the year. Current renovation activity includes projects at our Courtyard Scottsdale, Homewood Suites Tucson, Hyatt Place Mesa, and Hyatt House Orlando Universal.

Speaker #3: There are no additional acquisitions, dispositions, share repurchases, or capital markets activities assumed in the company's full-year outlook beyond those already reflected as of August 5, 2026.

Speaker #3: From a capital expenditure perspective, our guidance assumes pro rata capital expenditures range between $55 million to $65 million for the year. Current renovation activity includes projects at our Courtyard Scottsdale, Homewood Suites Tucson, Hyatt Place Mesa, and Hyatt House Orlando Universal.

Speaker #3: Finally, I'd note that the pro rata fee income we earn under the GIC joint ventures covers approximately 15% of our annual cash corporate G&A expense, prior to factoring in any potential promote distributions that we may earn over the course of the year.

Jon Stanner: Finally, I'd note that the pro rata fee income we earn under the GIC joint ventures covers approximately 15% of our annual cash corporate G&A expense prior to factoring in any potential promote distributions that we may earn over the course of the year. In summary, we're incredibly encouraged by our recent operating trends and our Q2 financial results. More importantly, we believe the long-term outlook for the lodging industry is profoundly favorable, as new hotel supply growth is expected to remain well below historical averages for several more years.

Speaker #3: In summary, we're incredibly encouraged by our recent operating trends and our Q2 financial results. More importantly, we believe the long-term outlook for the lodging industry is profoundly favorable, as new hotel supply growth is expected to remain well below historical averages for several more years. Additionally, consumer prioritization of travel and experiences provides a secular tailwind that we expect to persist.

Jon Stanner: Consumer prioritization of travel and experiences provide the secular tailwind that we expect to persist. The ongoing recovery in business travel is increasingly benefiting our urban-centric portfolio, supported by the breadth and depth of demand we are experiencing across our highest-rated segments. We believe these dynamics support continued top-line growth and margin expansion through the balance of 2026 and beyond. With a strengthened balance sheet, high-quality portfolio, and accelerating operating momentum, we believe Summit is exceptionally well-positioned to deliver strong shareholder returns going forward. With that, operator, we'd be happy to open the line for questions.

Speaker #3: The ongoing recovery in business travel is increasingly benefiting our urban-centric portfolio, supported by the breadth and depth of demand we are experiencing across our highest-rated segments.

Speaker #3: We believe these dynamics support continued top-line growth and margin expansion through the balance of 2026 and beyond. With a strengthened balance sheet, high-quality portfolio, and accelerating operating momentum, we believe Summit is exceptionally well-positioned to deliver strong shareholder returns going forward.

Speaker #3: And with that, operator, we'd be happy to open the line for questions.

Speaker #1: Thank you. We are now opening the question-and-answer session. If you'd like to ask a question, please press star followed by the number 1 on your telephone keypad.

Operator: Thank you. We are now opening the question and answer session. If you'd like to ask a question, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star one again. Thank you. We'll be taking a moment to let the questions come in. Your first question comes from the line of Austin Wurschmidt from KeyBanc Capital Markets. Your line is now open. Please go ahead.

Speaker #1: If you would like to withdraw your question, please press star one again. Thank you. We'll take a moment to let the questions come in.

Speaker #1: Your first question comes from the line of Austin Werschmidt. From KeyBank Capital Markets, your line is now open. Please go ahead.

Speaker #2: Thanks. Good morning, everybody. So, John, you hit on a little bit of the kind of durable demand trends that you're seeing across the business and some of the segments that outperformed during the quarter, retail you mentioned, group was another.

Austin Wurschmidt: Thanks. Good morning, everybody. Jon, you hit on a little bit of the kind of durable demand trends that you're seeing across the business and some of the segments that outperformed during the quarter. Retail, you mentioned. Group was another. I guess, what's the opportunity going forward to continue to shift mix and really drive rate and flow through to the bottom line towards the back half of the year?

Speaker #2: I guess, what's the opportunity going forward to continue to shift mix and really drive rate and flow through to the bottom line toward the back half of the year?

Speaker #3: Yeah. Thanks, good morning, Austin. I think you kind of highlighted a lot of the trends that we saw really going back to March of this year, which was a remixing of the business.

Jon Stanner: Yeah, thanks. Good morning, Austin. I think you kind of highlighted a lot of the trends that we saw really going back to March of this year, which was a remixing of the business. This is a reversal of kind of what we dealt with through a lot of 2025 when we were more heavily reliant on some of the discount channels, the OTA channels, and lower-rated transient business. I do think the opportunity is to continue to see more of what we saw in the Q2. As we alluded to in the prepared remarks, this was much more than just kind of a World Cup-driven event in the quarter. Our strongest segments were our highest-rated segments. I do think we continue to expect very strong demand and pricing power on the corporate side, both from a group and a transient perspective.

Speaker #3: And this is a reversal of kind of what we dealt with with through a lot of 2025 when we were more heavily reliant on some of the discount channels, the OTA channels, and lower-rated transient business.

Speaker #3: I do think the opportunity is to continue to see more of what we saw in the Q2. As we alluded to in the prepared remarks, this was much more than just kind of a World Cup-driven event in the quarter.

Speaker #3: Our strongest segments were our highest-rated segments. I do think we continue to expect very strong demand and pricing power on the corporate side, both from a group and a transient perspective.

Speaker #3: And as I said, these particularly the smaller groups, we've seen really strong pickup from in the quarter. And our expectation is for that to continue.

Jon Stanner: As I said, particularly these smaller groups, we've seen really strong pickup from in the quarter, and our expectation is for that to continue. Obviously, the Q2 was all kind of rate-driven RevPAR growth. We do expect our RevPAR growth in the H2 of the year to continue to be mostly rate driven, although maybe a little more balanced than what we saw in the Q2.

Speaker #3: Obviously, the quarter the Q2 was all kind of rate-driven rev par growth. We do expect our rev par growth in the back half of the year to be continue to be mostly rate-driven, although maybe a little more balanced than what we saw in the Q2.

Speaker #2: Can you frame up a little bit of the magnitude of that opportunity to get back to more historical norms, or maybe where the trend that you were on prior to kind of last year's disruption and you mentioned kind of having to rely more heavily on discount channels and lower-rated transient?

Austin Wurschmidt: Can you frame up a little bit of the magnitude of that opportunity to get back to more historical norms or maybe where the trend that you were on prior to kind of last year's disruption and you mentioned kind of having to rely more heavily on discount channels and lower-rated transient?

Speaker #3: Yeah, well, I think when we look at it by segment, obviously BT has lagged in the recovery, really going all the way back to the pandemic.

Jon Stanner: Yeah. Well, I think when we look at it by segment, obviously BT has lagged in the recovery, really going all the way back to the pandemic. To me, that still feels like where the incremental growth opportunity has been, and I think we've gotten away a lot in the industry from comparing to 2019 levels. I do think that has been the slowest segment to recover. You're seeing tremendous momentum there. Some of it is all the growth we're seeing in the technology world. A lot of it's driven by the strength in kind of the AI build-out, and we are definitely benefiting from that to some degree. The other thing that is benefiting our portfolio, that has been driven a little bit by easier year-over-year comps, is growth in government. Government was down meaningfully, really starting kind of 1 March of last year.

Speaker #3: To me, that still feels like where the incremental growth opportunity has been. And I think we've gotten away a lot in the industry from comparing to 2019 levels, but I do think that has been the slowest segment to recover.

Speaker #3: You're seeing tremendous momentum there. Some of it is all the growth we're seeing in the technology world. A lot of it's driven by the strength in kind of the AI build-out.

Speaker #3: And we are definitely benefiting from that to some degree. The other thing that is benefiting our portfolio that has been driven a little bit by easier year-over-year comps is growth in government.

Speaker #3: And so government was down meaningfully, really starting kind of March 1st of last year. It trended down 20 to 25% through the year. We were up a little over 8% in the quarter.

Jon Stanner: It trended down 20% to 25% through the year. We were up a little over 8% in the quarter. We do expect that to be kind of another leg of growth for us in the back half of the year.

Speaker #3: We do expect that to be kind of another leg of growth for us in the back half of the year.

Speaker #2: And then just last one for me, switching gears a little bit with the transaction market thawing, more opportunities to recycle capital out of some of the less core markets on a maybe larger scale than you have been able to do in recent years, or are you still limited to those smaller deals?

Austin Wurschmidt: Just last one from me, switching gears a little bit. With the transaction market thawing, more opportunities to recycle capital out of some of the less core markets on a maybe larger scale than you have been able to do in recent years? Or are you still limited to those smaller deals? That's it for me. Thank you.

Speaker #2: That's it for me. Thanks.

Speaker #3: Yeah. Well, look, I think we said alluded to this again in the prepared remarks. We have seen more activity in the transaction market, which has been encouraging.

Jon Stanner: Yeah. Well, look, I think we alluded to this again in the prepared remarks. We have seen more activity in the transaction market, which has been encouraging, and I think we've always felt like the catalyst for more activity was better operating fundamentals. Clearly, we've started to see that. I do think it kind of broadens the aperture in terms of what we can look at. I still feel where we sit today, the most effective transaction for us has been this kind of 1 or 2 portfolio, maybe 3 asset type of portfolio deal, where we take a very targeted approach and very often are finding more local regional buyers. I wouldn't say that that has changed yet.

Speaker #3: And I think we've always felt like the catalyst for more activity was better operating fundamentals, and clearly, we've started to see that. So I do think it kind of broadens the aperture in terms of what we can look at.

Speaker #3: I still feel where we sit today, the most effective transaction for us has been this kind of one or two portfolio, maybe three asset type of portfolio deal where we take a very targeted approach and very often are finding more local regional buyers.

Speaker #3: I wouldn't say that that has changed yet, but as you alluded to, as the financing markets remain very, very strong and we see more activity in the transaction market, I do think it broadens what we can look at there.

Jon Stanner: As you alluded to, as the financing markets remain very, very strong and we see more activity in the transaction market, I do think it broadens what we can look at there.

Austin Wurschmidt: Thanks for the time.

Speaker #3: Thanks, Austin.

Jon Stanner: Thanks, Austin.

Speaker #1: Your next question comes from the line of Michael Belisario from Bearn. Your line is now open. Please go ahead.

Operator: Your next question comes from the line of Michael Bellisario from Baird. Your line is now open. Please go ahead.

Speaker #4: Hey, John. Good morning. Just on the demand front, kind of how are you thinking about sort of just the market and segment rotation? Customer segment rotation, that is that that occurred in June because of the World Cup?

Michael Bellisario: Hey, Jon. Good morning. Just on the demand front, how are you thinking about sort of just the market and segment rotation, customer segment rotation that occurred in June because of the World Cup? I understand your performance was broad-based, as you mentioned, trying to understand just how you and your operators are thinking about sort of the underlying demand run rate ex World Cup.

Speaker #4: And I understand your performance was broad-based, as you mentioned, but trying to understand just how you and your operators are thinking about sort of the underlying demand run rate, ex-World Cup.

Speaker #3: Yeah. I'd say a couple of things. When we look at our Q2, we attributed about 100 basis points of 5% rev par growth specifically to the World Cup.

Jon Stanner: Yeah. I'd say a couple things. When we look at our Q2, we attributed about 100 basis points of 5% RevPAR growth specifically to the World Cup. I think as everyone has been well-documented, the World Cup was really a rate-driven event and kind of a last-minute transient rate-driven event. We even saw some modest occupancy declines in a lot of the World Cup markets. I think as we look forward, we think the magnitude of the World Cup effect will be less, or it was less in the month of July than it was certainly in the month of June, and will be less in Q3 than it was in Q2.

Speaker #3: I think as kind of everyone has been well documented, as the World Cup was really a rate-driven event and kind of a last-minute transient rate-driven event, we even saw some modest occupancy declines in a lot of the World Cup markets.

Speaker #3: And so I think as we look forward, we think the magnitude of the World Cup effect will be less or it was less in the month of July than it was certainly in the month of June and will be less in the month in the Q3 than it was in the Q2.

Speaker #3: We think the opportunity is a lot of kind of what we saw really through beginning kind of March 1st through July which was better performance in retail and our highest-rated segments retail, corporate negotiated rates in particular, and then some on kind of the smaller group opportunity.

Jon Stanner: We think the opportunity is a lot of what we saw really through beginning 1 March through July, which was better performance in retail, in our highest-rated segments, retail, corporate negotiated rates in particular, and then some on kind of the smaller group opportunity. I think that's where the opportunity lies for the back half of the year, and we would expect those trends to continue. As I said in response to Austin's call, we are coming off relatively easy government comps, and that's providing another tailwind from a segmentation perspective. It is replacing some of the lower-rated business, if you look at our channel mix, we were actually down year-over-year in Q2 in our OTA mix, which was very much an intentional strategy.

Speaker #3: I think that's where the opportunity lies for the back half of the year, and we would expect those trends to continue. As I said in response to Austin's call, we are coming off relatively easy government comps, and that's providing another tailwind from a segmentation perspective.

Speaker #3: It is replacing some of the lower-rated business. And so if you look at our channel mix, we were actually down year-over-year in the Q2 in our OTA mix, which was very much an intentional strategy.

Speaker #4: That's helpful. And then just. Mentioned, I think it was what, 5% rev par or 6%. For the month, any specific commentary sort of post-World Cup that you can point to just in sort of the sustainability of the sort of pre-World Cup trends you saw too?

Michael Bellisario: That's helpful. Just mentioned, I think it was, what, 5% RevPAR or 6% for the month. Any specific commentary sort of post-World Cup that you can point to just in sort of the sustainability of the sort of pre-World Cup trends you saw too? That's all for me. Thank you.

Speaker #4: And that's all for me. Thank you.

Speaker #3: Yeah. As you alluded to, July we are preliminary numbers are up 6%. We think that a portion of that was World Cup demand, but I do think a lot of the trends that we saw in the Q2 have continued into the end of the Q3 specifically in July a lot of the strength that we just alluded to.

Jon Stanner: Yeah. As you alluded to, July, our preliminary numbers are up 6%. We think that a portion of that was World Cup demand, I do think a lot of the trends that we saw in Q2 have continued into Q3, specifically in July. A lot of the strength that we just alluded to. For Q3, we're currently pacing up roughly mid-single digits. A little bit softer in August, September much stronger. We're very encouraged by the recent trends that we've seen and think a lot of them will persist in the back half of the year.

Speaker #3: For the Q3, we're currently pacing up roughly mid-single digits. A little bit softer in August, but September much stronger. And so we're very encouraged by the recent trends that we've seen and think a lot of them will persist in the back half of the year.

Speaker #4: Got it. Thank you.

Michael Bellisario: Got it. Thank you.

Speaker #3: Thanks, Mike.

Jon Stanner: Thanks, Mike.

Speaker #1: Your next question comes from the line of RJ Milligan from Raymond James. Your line is now open. Please go ahead.

Operator: Your next question comes from the line of R.J. Milligan from Raymond James. Your line is now open. Please go ahead.

Speaker #2: Yeah. Good morning, guys. John, I was wondering if maybe you could talk about expectations for expenses in the back half of the year and maybe some of the puts and takes as we think about '27.

RJ Milligan: Good morning, guys. Jon, I was wondering if maybe you could talk about expectations for expenses in the back half of the year and maybe some of the puts and takes as we think about 2027.

Speaker #3: Yeah, sure. We do think the first thing I would say is I think the team continues to do a very good job controlling expenses.

Jon Stanner: Yeah, sure. The first thing I would say is I think the team continues to do a very good job controlling expenses. Our expense growth was up 4% in the quarter. We do expect expenses for the full year to come in around 3% up year-over-year. That does imply slightly tighter expense growth in H2 than H1. I will say our Q2 was our most difficult comp from an expense growth perspective. Relative to our expectations coming into the quarter, our expenses actually beat expectations, even though they were 4% year-over-year. Again, some of that has to do with the year-over-year comp. As I said, I expect us to be able to continue to tightly control expenses in H2.

Speaker #3: Our expense growth was up 4% in the quarter. We do expect expenses for the full year to come in around 3% up year-over-year. That does imply slightly tighter expense growth in the back half of the year than the first half of the year.

Speaker #3: I will say our Q2 was our most difficult comp from an expense growth perspective. So relative to our expectations coming into the quarter, our expenses actually beat expectations even though they were 4% year-over-year.

Speaker #3: And again, some of that has to do with the year-over-year comp. As I said, I expect us to be able to continue to tightly control expenses in the back half of the year.

Speaker #3: As we look out beyond that, we do feel like things are pretty stable. Labor is obviously our largest expense line. Our labor costs have been trending up about 4% in the first half of the year.

Jon Stanner: As we look out beyond that, we do feel like things are pretty stable. Labor is obviously our largest expense line. Our labor costs have been trending up about 4% in H1. A lot of the wage adjustments do get reflected there, we think that moderates in H2. We feel pretty good about the trajectory that we're on, even as we look out into next year. We feel like things are actually pretty stable on the expense front at this point.

Speaker #3: A lot of the wage adjustments do get reflected there, and so we think that moderates in the back half of the year. We feel pretty good about the trajectory that we're on, even as we look out into next year.

Speaker #3: We feel like things are actually pretty stable on the expense front at this point.

Speaker #2: Thanks, John. That's helpful. And I guess in the quarter, brought back a little bit of stock, a much lower stock price. I'm just curious how you're thinking about buybacks here today versus issuing equity.

RJ Milligan: Thanks, Jon. That's helpful. I guess, in the quarter, you bought back a little bit of stock at a much lower stock price. I'm just curious how you're thinking about buybacks here today versus doing equity. How do you feel about your cost of capital?

Speaker #2: How do you feel about your cost of capital?

Speaker #3: Yeah. Well, look, I think the first thing I would say is it's been a very positive development to see all the stocks appreciate fairly meaningfully over the last quarters.

Jon Stanner: Well, look, I think the first thing I would say is, it's been a very positive development to see all the stocks appreciate fairly meaningfully over the last quarters. As you alluded to, we did buy some stock back early in the quarter when we saw a pretty meaningful dislocation. I think what we've seen is just kind of an improved confidence level around the trajectory of our portfolio in particular and kind of the broader industry at large. I don't think that our capital allocation priorities have changed at all. We've obviously been very focused on selling non-core assets at attractive prices, using the proceeds from that to deleverage the balance sheet, reinvest in the portfolio, and buy back stock when we've seen these kind of obvious, enormous dislocations in the stock price like we saw in the first part of Q2.

Speaker #3: As you alluded to, we did buy some stock back early in the quarter when we saw a pretty meaningful dislocation. I think what we've seen is just kind of an improved confidence level around the trajectory of the our portfolio in particular and kind of the broader industry.

Speaker #3: As a whole, I don't think that our capital allocation priorities have changed at all. We've obviously been very focused on selling non-core assets at attractive prices.

Speaker #3: Using the proceeds from that to deleverage the balance sheet, reinvest in the portfolio, and buy back stock when we've seen kind of these kind of obvious enormous dislocations in the stock price like we saw in the first part of the Q2.

Jon Stanner: From a very near-term perspective, I do expect us to continue to be a net seller of assets, R.J.

Speaker #3: And from a very near-term perspective, I do expect us to continue to be a net seller of assets, RJ.

Jon Stanner: From a very near-term perspective, I do expect us to continue to be a net seller of assets, R.J.

Speaker #2: Great. That's it for me. Thanks, guys.

RJ Milligan: Great. That's it for me. Thanks, guys.

Speaker #3: Thanks, RJ.

Jon Stanner: Thanks, R.J.

Speaker #1: Again, if you would like to ask a question, please press star followed by the number one on your telephone keypad. It seems that as of the moment, we don't have any questions queued up, so that concludes our question and answer session.

Operator: Again, if you would like to ask a question, please press star followed by the number one on your telephone keypad. It seems that as of the moment, we don't have any questions queued up, so that concludes our question and answer session. I will now be passing the call over to Jon Stanner, CEO, for closing remarks.

Speaker #1: I will now be passing the call over to John Stanner, CEO, for closing remarks.

Speaker #3: All right. Well, thank you all for joining us today. We look forward to speaking with many of you over the coming weeks and months.

Jon Stanner: Well, thank you all for joining us today. We look forward to speaking with many of you over the coming weeks and months. Have a great day. Thank you.

Speaker #3: Have a great day. Thank you.

Operator: Thank you everyone for attending this call. You may now disconnect.

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