Good morning, and welcome to the Host Hotels & Resorts Fourth Quarter 2021 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the call over to Jaime Marcus, Senior Vice President of Investor Relations.

Thank you, and good morning everyone. Before we begin, please note that many of the comments made today are considered to be forward-looking statements under Federal Securities Law. As described in our filings with the SEC, these statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed, and we are not obligated to publicly update or revise these forward-looking statements. In addition, on today's call we will discuss certain non-GAAP financial information, such as FFO, adjusted EBITDAre and hotel-level results. You can find this information together with reconciliations to the most directly comparable GAAP information in yesterday's earnings press release, in our 8-K filed with the SEC, and in the supplemental financial information on our website at hosthotels.com. With me on today's call will be Jim Risoleo, President and Chief Executive Officer; and Sourav Ghosh, Executive Vice President and Chief Financial Officer. With that, I would like to turn the call over to Jim.

Thank you, Jaime, and thanks to everyone for joining us this morning. Despite the uncertainty of the COVID-19 variant, we significantly outperformed expectations during the fourth quarter and substantially beat consensus metrics for the year. We delivered adjusted EBITDAre of $242 million, which exceeded our interest in capital expenditures by $68 million and achieved adjusted FFO per share of $0.29 during the quarter. In addition to delivering positive metrics each quarter, we achieved meaningful sequential increases each quarter throughout 2021. Pro forma total revenues in the fourth quarter grew 20% compared to the third quarter, while pro forma hotel-level operating expenses increased only 15%. RevPAR for the fourth quarter was $148, as volume and rates continued to hold up at our hotels in Sunbelt markets. This is the highest quarterly RevPAR we have seen since the onset of the pandemic and closes out a year of strong sequential improvements. RevPAR improved 13%, compared to the third quarter, despite some softening of demand in late December due to the Omicron variant. Our recent acquisitions, which I will touch on shortly, all contributed to our outperformance during the fourth quarter and are exceeding our underwriting expectations. Preliminary January RevPAR is expected to be approximately $105, a 130% increase over January 2021. Our preliminary February RevPAR forecast is expected to be $150 to $155 and we expect a significant pickup across business segments in March, which is consistent with the recovery we experienced following the Delta variant. In addition to delivering significant operational improvements, we continue to be recognized as a global leader in corporate responsibility. Our 2025 emissions target is verified by the Science Based Targets Initiative at the 1.5 degree Celsius ambition level, making Host the first hospitality company and among the first three real estate companies in North America to set emissions reduction targets in line with the Paris agreement's highest level of ambition. To complement our environmental targets, we were the first lodging REIT to issue social targets, including two diversity-related targets and one employee engagement target. We also continue to execute on our three strategic objectives, all of which are aimed at elevating the EBITDA growth profile of our portfolio. As a reminder, our objectives include redefining the hotel operating model with our operators, gaining market share at renovated hotels and strategically allocating capital. As it relates to the last strategic objective, during the fourth quarter we acquired two hotels and sold six hotels. Subsequent to quarter end, we sold one additional hotel. This brings our total early cycle acquisitions to $1.6 billion at a blended 13 times EBITDA multiple, and our dispositions to approximately $1 billion at a 15.4 times EBITDA multiple, including estimated foregone capital expenditures of $290 million. This is a continuation of our strategy to deploy capital into assets that we believe will elevate the EBITDA growth profile of our portfolio. As a refresher, our 2021 acquisitions included the Hyatt Regency Austin, Four Seasons Orlando at Walt Disney World, Baker's Cay Resort in Key Largo, The Laura Hotel in Houston, Alila Ventana Big Sur, The Alida, Savannah, and Hotel Van Zandt in Austin. We also acquired the Royal Ka'anapali and Ka'anapali Golf Courses in Maui. All of our recent acquisitions are performing substantially ahead of our underwriting expectations. For the full year 2021, EBITDA at our new acquisitions was $37 million higher than the full-year 2021 EBITDA that was estimated at underwriting, which represents a 73% increase, and the golf courses were $4 million higher. Turning to our fourth quarter acquisitions. In December, we closed on The Alida, Savannah, a 173-key boutique hotel for approximately $103 million. This newly constructed hotel opened in October 2018 and benefits from soft branding in Marriott's Tribute Portfolio. With no expected near-term CapEx, favorable operating costs and multiple demand drivers, stabilization for The Alida is expected in the 2024 to 2025 timeframe at approximately 11 times to 12 times EBITDA. In addition, in December, we acquired our second hotel in Austin, the Hotel Van Zandt, a 319-key luxury lifestyle hotel for approximately $246 million, including its $4 million FF&E reserve. The acquisition price represents a 13.2 times multiple on 2019 EBITDA. We funded the acquisition with approximately $140 million in proceeds from recent dispositions and assumed approximately $102 million of existing secured debt. Located adjacent to Austin's popular Rainey Street entertainment district, this recently constructed hotel opened in 2015 and is poised to benefit from continued large-scale development. We expect the hotel to stabilize at approximately 10 times to 12 times EBITDA in the 2025 to 2027 timeframe. On the dispositions front, we sold the 305-key W Hollywood in December for $197 million or 25 times 2019 EBITDA. When calculating the EBITDA multiple, we included $33 million of estimated forgone CapEx over the next five years. This is the third ground lease asset we sold in 2021. In addition, subsequent to quarter end, we sold the 1220-key Sheraton Boston for $233 million or 14.2 times 2019 EBITDA. When calculating the EBITDA multiple, we included $135 million of estimated forgone CapEx over the next five years. In connection with the sale, we are providing a $163 million bridge loan to the purchaser, which we expect will be repaid within its first six month term. Looking back on our transaction activity since 2018, we have acquired $3.2 billion of assets at a 14 times EBITDA multiple, and disposed of $4.5 billion of assets at a 17 times EBITDA multiple, including $793 million of foregone CapEx over the next five years. With these transactions, we have dramatically improved the quality of our portfolio. Comparing pro forma 2019 results for our current portfolio to 2017, we have increased the RevPAR of our assets by 11%, the EBITDA per key by 20%, and the EBITDA margins by 120 basis points. As we continue to evaluate capital allocation opportunities going forward, our efforts will remain focused on assets that further bolster our EBITDA growth profile. As part of our capital allocation efforts, in January, we acquired a 49% interest in the asset management platform of Noble Investment Group to cultivate innovative hospitality opportunities within Noble's private fund platform. We invested $90.7 million in its fee-based asset management business, comprising $35 million of cash and $55.7 million of equity, or 3 million operating partnership units which are subject to a one-year lockup period. In the future, we also have the ability to acquire an additional 26% to 51% in Noble, which would bring our aggregate interest to between 75% and 100%. In addition, we have made a $150 million LP commitment to the next Noble fund. Based on our current ownership interests, we are targeting average net expected earnings of $7 million to $10 million annually over the next three years. Over the past three decades, Noble has invested nearly $5 billion in acquiring and developing approximately 150 assets in the branded upscale select service and extended stay segments across 84 markets in the U.S. Founded in 1993 by Mit Shah, who remains the CEO, the Noble team has a multi-cycle track record and extensive experience sourcing investment opportunities in real estate and capital markets. Our investment represents yet another opportunity to elevate the EBITDA growth profile of our portfolio by creating a new income source from recurring management and development fees, and allowing for investment and select service hotels, extended stay hotels, and new development opportunities. The partnership will combine Noble's strong track record, development acumen in the select service and extended stay categories, and fund management experience with our scale, market insights, and data analytics to source differentiated investment opportunities. By capitalizing on Noble's deep expertise, we will have the ability to incubate and invest in future lodging-adjacent strategies, thereby creating additional paths for long-term strategic value creation. Those strategies include property technology solutions, development, and alternative lodging. We believe a fund vehicle is one of the best ways to gain chain-scale diversification. As Noble's expertise with select service and extended stay hotels will preserve our focus on investing in upper upscale and luxury hotels and resorts. Moving on to fourth quarter operations, we continued to close the gap to 2019. Transient demand in the fourth quarter was 82% of 2019 levels, compared to 77% in the third quarter and 58% in the first half of 2021. And we are encouraged that transient rate in each of the four quarters in 2021 exceeded rates in 2019. Our hotels also saw continued improvement in Group during the fourth quarter compared to the third quarter, driven by demand growth of 15% and a 17% rate improvement. Also bolstering our Group results was the continued meaningful improvement in banquets. Banquet and AV revenue was $150 million in the fourth quarter, up 84% over the third quarter after having doubled from the second quarter to the third quarter. Sourav will get into more detail on business mix in the fourth quarter shortly. In addition to successfully deploying capital this year, we continue to focus on our three strategic objectives. As a reminder, we are targeting a potential $267 million to $342 million of incremental stabilized EBITDA on an annual basis from the initiatives and projects underlying our strategic objectives. Approximately $120 million is expected to come from the seven acquisitions we completed in 2021. $100 million to $150 million is expected to come from potential long-term cost savings over time, based on 2019 revenues from redefining our operating model with our managers. We have taken steps toward 50% to 60% of these savings to-date. Another $22 million to $37 million of incremental stabilized EBITDA is related to our goal of gaining 3 to 5 points of weighted index growth at the 16 Marriott Transformational Capital Program hotels, and eight other hotels where major renovations have been recently completed or are underway. In 2021, we completed three Marriott Transformational Capital Program properties, and subsequent to quarter end we completed two more, bringing the number of completed properties in this program to 12 out of 16. In August, we completed the final phase of construction at the New York Marriott Marquis, and in October, we completed the final phase at the Orlando World Center Marriott, closing out both of these three-year transformational renovation programs. Other properties completed over the past year includes the Houston Marriott Medical Center, the Marina del Rey Marriott and the Ritz-Carlton Amelia Island. We completed approximately 85% of the program as of year-end, and we expect to substantially complete it by the end of 2022. The remaining Marriott Transformational Capital Program properties include Boston Copley, the San Diego Marriott Marquis, Marriott Metro Center, and the JW Marriott in Houston. We expect to receive approximately $11 million in operating profit guarantees under the Marriott Transformational Capital Program in 2022. Additionally, this year we added three hotels to our list of major renovations. The Western Denver Downtown, Miami Marriott Biscayne Bay, and The Westin Georgetown in Washington DC. Finally, the remaining $25 million to $35 million of incremental stabilized EBITDA over time on an annual basis is expected to come from recently completed and ongoing ROI development projects. These projects are at different stages of renovation and development, and stabilization is expected to occur two to three years after completion. To-date, our ROI development projects at the Andaz Maui Villas and the 1 Hotel Beach Club have reduced returns significantly greater than our original underwriting. Our 2022 capital expenditure guidance range is $500 million to $600 million, which reflects our continued focus on reinvesting in our properties during the early phase of the recovery to position our portfolio for future demand. The plan includes $245 million for redevelopment and repositioning projects such as the completion of the Ritz-Carlton Naples beach transformation and tower expansion, a transformational renovation of the Fairmont Kea Lani, and completion of the Orlando World Center water park and meeting space expansion. It is worth noting that our capital expenditure range at the midpoint is $125 million higher than last year, which is driven by increased investment in ROI development projects, as well as more normalized maintenance CapEx spend. To conclude my remarks, we made significant strides towards improving the quality of our portfolio in 2021. Despite the recent volatility, we remain encouraged by the recovery we are seeing across the lodging industry. Our capital allocation efforts over the past few years combined with the geographic diversity of our portfolio and our strong balance sheet leave us very well-positioned to create significant long-term value for our stockholders. With that, I will now turn the call over to Sourav.

Thank you, Jim and good morning everyone. Following Jim's comments, I will go into detail on our fourth quarter top-line performance, margins, our thoughts for 2022 and provide an update on our balance sheet and dividend. Despite headwinds from two COVID variants, we continued to benefit from quarterly sequential improvements with 70 hotels achieving positive hotel EBITDA for the entire quarter, compared to 61 hotels last quarter. Notably, our three New York City hotels, two downtown Boston Hotels, and the San Francisco Marriott Marquis, all achieved positive EBITDA in the fourth quarter. Moving on to top-line performance. Fourth quarter RevPAR was the highest it has been since the onset of the pandemic. In addition, December had its highest monthly ADR in Host history, which is indicative of the quality of our assets and the pricing power of this recovery. While these improvements have been driven by leisure travel in Sunbelt markets and Hawaii, which saw fourth quarter RevPAR up 16% to $198 over the third quarter, our urban markets continued to deliver sequential operational improvements. During the fourth quarter, our urban markets grew by 13% to a RevPAR of $108, once again representing the best quarter of the recovery for these hotels. Turning to business segments. During the fourth quarter, transient revenue improved 7% over the third quarter, driven by a 9% rate increase. Transient revenue at Sunbelt and Hawaii hotels was up 8% sequentially, driven by a 12% improvement in rate and once again exceeded prior peak levels. Drilling down to resorts, our properties grew transient revenue 30% over the fourth quarter of 2019, driven by a 35% increase in rate. Compared to the fourth quarter of 2019, Alila Ventana Big Sur, one of our recent acquisitions, grew revenue by over 130%, which was driven by a rate increase of 98%. For context, that rate equates to more than a $1,000 increase. All 16 of our resorts had rates 20% higher than the fourth quarter of 2019. Transient rate in our urban and downtown markets was up 7% over the third quarter, with demand also up 1%, which was driven by our hotels in New York and DC. Even with Omicron concerns dominating headlines, business transient demand improved by 5% over the third quarter, with rate up 20%. This was driven by significant growth in October, which had the highest amount of business travel room nights of any month since the onset of the pandemic. Nearly half of our business transient rooms sold in the fourth quarter were in urban and downtown markets where demand was up 16% and rate was up 10% over the third quarter. Wrapping up on business transient with more encouraging news, we continued to see a return to traditional business travel. In the fourth quarter, our operators' traditional top 10 accounts made up 70% of business transient rooms, which is up from 40% in the third quarter. This segment continued its upward trajectory. We were encouraged by net booking activity in the quarter for the quarter, resulting in 660,000 group rooms sold for the fourth quarter. This level of demand represents 60% of 2019 levels and is up from 52% in the third quarter, putting us at 1.2 million group room nights in the second half of 2021. Group revenue increased 35% over the third quarter, driven by 15% demand growth, combined with a 17% improvement in rate. Most of the room night increase came from Boston, Phoenix, San Diego and San Francisco. Corporate group room nights increased 11% over the third quarter with a 23% increase in rate. San Antonio and Phoenix drove most of the demand growth in this sub-segment. In the fourth quarter, corporate group room nights were 55% of 2019, compared to 29% for the first half of 2021. Association groups also showed steady sequential improvements. Fourth quarter association group room nights increased 19% over the third quarter, with a 15% increase in rate, largely driven by our hotels in San Diego. Association group room nights were 45% of 2019 in the fourth quarter, compared to only 11% for the first half of 2021. Looking forward to our expectations for Group in 2022, we currently have 2.8 million definite group room nights on the books, which compares favorably to the 2.5 million group room night we would have had on the books as of the third quarter, after adjusting for recent acquisitions and dispositions. Group rates in 2022 remain up 1% to 2019 and group demand is currently front-loaded with roughly 60% of definite group rooms booked in the first half of the year. Last quarter, we provided a comparison to 2019 group room nights. At that time, our definite group room nights on the books represented 54% of 2019 actuals. Adjusted for our transactions and including bookings from the fourth quarter, 2022 definite group room nights now stand at 60% of 2019 actuals. And total group revenue pace is down just 20% to 2019, which is an additional testament to the quality of our portfolio and the strength of the lodging recovery. Moving onto expenses. Proforma total hotel operating costs rose by 15% during the fourth quarter compared to the third quarter, despite a 20% increase in total revenues. Variable expenses were down 30% relative to a total revenue decline of 25% when compared to the fourth quarter of 2019. Through February of last year, variable expense declines were roughly in line with revenue expense decline, but this trend diverged as hotels struggled to staff up at the pace of demand growth. Our managers' hiring efforts were successful in the fourth quarter, and the differential between our variable expense decline and the revenue decline narrowed compared to the third quarter. Fixed expenses including wages and benefits were 19% lower than the fourth quarter of 2019 and 9% higher than last quarter. We continue to see savings from reductions in Above Property services, which were still down substantially to 2019. As expected, on-property sales efforts are ramping up, which offset some of the expense savings in the quarter. Our hotel EBITDA margin in the fourth quarter was 26.9%, which is just about 80 basis points below that of the fourth quarter 2019. When you consider that our revenue is still 25% below its fourth quarter 2019 level, our margins are quite impressive. Given increased levels of staffing and fixed costs that were re-introduced in the second half of 2021, fourth quarter margin strength was primarily a result of higher resort rates, better than anticipated food and beverage revenue, and elevated cancellation revenues. Turning to our outlook for 2022, we are still unable to provide operational guidance given the continued volatility surrounding COVID. That said, we expect sequential quarterly RevPAR improvements driven by demand growth across our portfolio and continued rate strength at our resorts. We also expect group and business transient to continue improving in our urban and downtown markets, as impacts from future COVID variants lessen, company's return to the office, and traditional groups get back to meeting in person. As a reminder, Easter is much later this year, so some of the pickup we would normally get at the end of the first quarter could bleed into the second quarter. Although we are not able to provide operational guidance, we would like to provide expected ranges for our corporate G&A and interest expense. For the full year, we anticipate corporate G&A to be in the $103 million to $106 million range and we anticipate our interest expense to be in the $146 million to $149 million range. From a timing perspective, we expect these expenses to be relatively evenly spread over each quarter in 2022. Turning to our balance sheet and liquidity position. As we discussed last quarter, we were able to exit our credit facility covenant waiver period three quarters ahead of its expiration. And we achieved compliance with our bond indenture debt incurrence covenant. As a result, we were able to refinance a portion of our existing bonds with $450 million of new Series J green bonds at a 2.9% coupon, the lowest in the company's history. We also extended our weighted average maturity from 4.2 years to 5.1 years, lowered our weighted average interest rate to 3.1% and pushed our next maturity out to early 2024. In addition, during the fourth quarter and subsequent to quarter end, we paid down our outstanding revolver in full. Together, these actions will save us an estimated $5 million per quarter in interest expense. Pro forma for the revolver paydowns and the sale of the Sheraton Boston earlier this month, we now have $1.8 billion in total available liquidity comprised of approximately $200 million of cash, $144 million of FF&E reserves, and full availability of our $1.5 billion credit facility. Wrapping up, I am pleased to share that the Board of Directors authorized a first quarter dividend of $0.03 per share on Host common stock. All future dividends are subject to approval by the company's Board of Directors, but as the operational recovery continues, we expect to be able to grow our dividends to a sustainable level. To conclude, we are extremely proud of our achievements over the past year. 2021 showed that a sustained recovery is underway and we are optimistic that 2022 will continue to build on the strong momentum of the past few quarters. We remain very well-positioned to execute on our goal of increasing the EBITDA growth profile and improving the quality of our portfolio.

Ladies and gentlemen, the floor is now open for questions. Your first question for today is coming from Smedes Rose. Please announce your affiliation and pose your question.

Hi, it's Smedes with Citi. I was just wondering, Jim and Sourav, if you could just talk a little bit about the staffing levels you have achieved in your hotels. It sounds like demand is coming back faster than expected, and kind of where are you on being able to re-staff and maybe throw out your thoughts on just kind of what the pace of kind of wage and benefit increases should be over the course of '22?

Sure, Smedes, I'll take the first part of it, Sourav can take the second part of it. We added about 1,000 positions in the fourth quarter. And as you may recall, on the Q3 call we stated that the staffing levels were 94% of our managers is our goal. Typically, they run to about 97%, they never get to parity, they're never at 100%. With the increase in business volume in the fourth quarter, even though we added 1,000 positions, we still remain at about 94%. But I can tell you based on conversations we have had with our managers, there is a degree of confidence that the open positions are going to be able to be filled as things open up, as the variant gets behind us, as children get back to school in person across the country, and as the various forms of stimulus burn off, which many of them already have. So with that, I'll let Sourav talk about our point of view around wage increases and inflation.

Hey, Smedes. For 2022, we were expecting year-over-year increase wage rates of somewhere around 4% to 4.5%. And this is in line with sort of what we had spoken about in terms of the 19 to 22 CAGR you might recall, which we said would be somewhere around 5% to 7% in aggregate for our portfolio.

Your next question is coming from Bill Crow. Please announce your affiliation, then pose your question.

Good morning, everyone. This is from Raymond James. I have a follow-up for you, Jim, but first, I want to ask Sourav about the transition from 2021 to 2022 concerning a couple of line items. Can you quantify the total support you received from Marriott, including the transformational capital program and other performance guarantees in 2021? Also, what are your expectations for that in 2022? Jim, you mentioned $11 million related to the transformational aspect. Additionally, Sourav, you mentioned $40 million in cancellation and attrition fees during the second half of 2021. How much does that impact margins as you work to replace it with actual business?

To answer your first question, for 2022, we expect to receive $11 million from Marriott in operational profit guarantees, which is down from approximately $14 million in 2021. Regarding attrition and cancellation revenue, we earned around $20 million in that category during the fourth quarter, which is only $5 million more than what we achieved in 2019. Overall, for the full year, our attrition and cancellation revenue was similar to 2019, totaling around $55 million. The key difference lies in how we reached that figure, as the mix of attrition and cancellation revenue has changed. As business begins to rebound, we anticipate a decrease in group cancellation revenues, but an increase in transient cancellation revenue. Therefore, we expect the overall cancellation revenue mix to shift as we normalize throughout this year. However, when comparing total cancellation revenues from 2019 to 2021, they are quite similar.

That is helpful. Jim, I had a follow-up question. I’m going to challenge your point for a moment. You mentioned that the Noble investment was a smart way to achieve diversification across a broader scale. I’m paraphrasing, but have investors been asking Host for this, considering you’ve been focused on these excellent top 40 or maybe top 50 assets? I’m curious about what led you to consider that diversification.

Sure, Bill. I’m happy to answer the question. It is not something we have heard from investors quite frankly. But as we think from a strategy perspective, and playing the long game here, how can we transform the income stream of the company to make it more sustainable going forward? One of the things that has always been of interest to us is the fund management business. We talked a lot about strategy among the senior team and with our Board, focusing on three areas that Noble addresses for us. Fund management, how do we engage in select service without it becoming a distraction and without muddying up our story? We also have significant expertise on the development side. So as we considered those three objectives, the best way to achieve this is through an off-balance sheet vehicle, and we believe Noble is best in class. Investing in the Noble platform allows us to grow a sustainable fee stream over time that is not affected by the cyclicality of the lodging industry. It encompasses commitment fees, asset management fees, and development fees. This provides us with an opportunity to further deploy capital into the select service space without it being a distraction for the management team at Host. Mit Shah and his team have a long-standing history, having invested over $5 billion since 1993, and they have an excellent track record. Therefore, from our perspective, their approach to select service represents a very attractive investment, and we have made a $150 million commitment to his next fund. Lastly, participating in development projects through an off-balance sheet structure is also very appealing to us, as we never wanted to undertake this on our balance sheet due to the REIT model. This represents another potential to enhance the company's EBITDA growth profile in a way that will not distract but will combine two highly successful best-in-class organizations.

Great. I appreciate the answers.

Your next question is coming from Floris Van Dijkum. Please announce your affiliation, then pose your question.

Hi, this is Floris at Compass Point. Jim, I have a question regarding the valuation of hotels. First, I noticed you have sold three ground leases and have more available. I don't think you will be selling any of the San Diego ground-leased hotels, but could you share which other hotels might be for sale? Additionally, I saw that the 1 Hotel had $68 million in hotel EBITDA last year. How does that compare to pre-COVID levels? Some investors are concerned that while resort hotels are currently generating strong EBITDA, this could decline. How sustainable is the EBITDA from your top resort hotels, and could you discuss the growth prospects for those assets?

Floris, your question covers a lot of ground, so let me break it down for you. Starting with your inquiry about potential hotel sales and our thoughts on ground leases, we recently sold three ground lease hotels, and we currently do not plan to sell the Manchester Grand Hyatt or the San Diego Marina Marriott. Our main consideration in any acquisition or sale is whether it will improve the EBITDA growth profile of our portfolio. This is our fundamental focus as we assess if an asset will grow below, at, or above the average for Host's portfolio. Not all ground leases are the same. For instance, the ground leases tied to the San Diego properties have a maximum term of 65 years, allowing us to extend the lease whenever we invest in these assets, which is not the case with ground leases owned privately. If it makes sense for us to sell assets with ground leases, we will do so and reinvest that capital into new acquisitions or return on investment projects as we are currently doing to enhance our EBITDA growth profile. Regarding the 1 Hotel, I reviewed the supplemental information yesterday and noted the $68 million figure represents 8.8 times EBITDA based on our purchase price. Initially, we underwrote that deal at 13 times EBITDA, and in the first year, we achieved around 12.5 times. The asset has performed exceptionally well, and we’re very pleased. We believe the robust leisure demand witnessed during COVID will remain strong throughout 2022. While we might see some moderation in room rates at certain resort properties in 2023 and 2024 as international travel resumes, we expect that international visitors will also come to the U.S., especially to key markets like Miami, which serves as a prominent destination for leisure travel. Looking ahead, our 16 resorts have seen an increase of over 20% in average daily rate compared to 2019. Our properties are performing exceptionally well, there has been no resistance from consumers, and they are in excellent condition. If they require capital investments, we are willing to put in the necessary funds to continue achieving high rates.

Thanks, Jim.

Your next question is coming from Neil Malkin. Please announce your affiliation then pose your question.

Hey, everyone. It's Neil Malkin from Capital One Securities. I wanted to ask about the operating model you mentioned as one of the three areas you are focusing on to enhance the company and increase EBITDA. Yesterday, Hilton discussed their margins in terms of 400 to 600 basis points. Can you provide some insight now that we’re moving beyond COVID and you've implemented more brand-standard improvements? Does the projected 100 to 150 basis points seem low in light of the staffing, efficiencies, and ADRs you've observed? Do you think the previously communicated margin improvements might actually be less than what will ultimately occur?

Hey, Neil, it's Sourav. Regarding margin expansion, it will largely depend on how quickly we can return to 2019 revenue levels. We remain very confident in achieving an incremental EBITDA of $100 million to $150 million based on 2019 figures, but this return in revenue is crucial. If we recover through rate first, which seems likely, it would help improve margins even more. As for our initiatives, we are focusing on three main areas. The first is reducing management staffing across all hotels, which we assessed on a hotel-by-hotel basis through zero-based budgeting, identifying optimal staffing levels. We previously mentioned that we'd reduce 25% to 30% of management staffing permanently, and that's already incorporated into our 2022 budgets. The second area involves cutting Above Property charges, some of which have already been realized and will continue to yield savings. Lastly, we're addressing modifications or eliminations of certain brand standards while leveraging technology for better productivity. So far, we've initiated 60% of the planned $100 million to $150 million savings, and we're progressing on the remaining 40%, which focuses on brand standards and technology. Several brand standard changes have been implemented, such as discontinuing compendiums, making long stocks optional, relaxing robe and slipper standards at premium brands, and allowing flexibility in club lounge operating hours. There's been considerable progress here. We're still testing changes in housekeeping and expect to provide an update mid-year, but we won't revert to the 2019 model. Our goal is to offer more options and flexibility for guests while maintaining necessary satisfaction levels for each brand.

Yeah. Appreciate that. Thank you.

Your next question is coming from Jay Kornreich. Please announce your affiliation then pose your question.

Hey, it is Jay Kornreich with SMBC Nikko. Great to be on the call. With the return of office inflection point likely now underway, which we expect to lead to a strong recovery in BT demand, and you indicated seeing settlement in February, do you consider getting I guess more aggressive in shifting your acquisition pipeline to focus more on dense urban markets to get ahead of that instead of the resort and Sunbelt strategy over the past year?

So, Jay, your question is whether we’ll focus on future trends or past conditions. Regarding acquisition opportunities, I want to clarify that we are not excluding any U.S. markets or property types. However, we haven't observed many opportunities in major urban areas so far. Last year, we concentrated on Sunbelt and resort markets. Even if we were to invest in major urban markets, assuming we find the right asset at the right price, the nation's demographics suggest that we will keep investing in Sunbelt markets for many reasons. These include business and population inflows, a favorable operating environment, and a low cost structure, which make those markets appealing to us. Currently, we own 16 resorts, and according to supply statistics, the resort market is experiencing the lowest level of new supply nationwide, while big box hotels, many of which we own, have the second-lowest level. We are quite comfortable in both of these areas and will evaluate opportunities as they arise, but there hasn't been anything of interest on the market so far.

Okay. I appreciate the color. Thanks so much.

Your next question is coming from Stephen Grambling. Please announce your affiliation, then pose your question.

Hi, it's Stephen with Goldman Sachs. Following up on the urban market question, are you noticing any changes in the supply situation in these markets considering that some assets have been in a negative EBITDA for quite some time? Could that be a potential reason for you to reconsider entering those markets again?

Yes, Stephen, supply has significantly decreased in many markets across the country. CBRE and SGR estimate that supply growth will be just over 1% through at least 2023. The total project pipeline is down about 8% from pre-pandemic levels, and while there are many projects, they are not progressing as expected. A reassuring statistic is that the in-construction pipeline is currently about 25% of pre-pandemic levels. The supply situation varies significantly by location. The markets with the lowest supply include Hawaii, San Diego, San Francisco, and Seattle. However, there is still a considerable amount of supply being introduced in New York, which we anticipate will continue into '22 and '23, along with an influx in Los Angeles. Some hotels may not reopen in San Francisco and New York, but it’s not as drastic as previously discussed during the pandemic regarding a large exit of hotel inventory from the market. So, it's very market and asset specific, as well as pricing specific, but we will continue to explore opportunities with the primary goal of enhancing the EBITDA growth profile of the company.

Helpful. Thanks. I will jump back in the queue.

Your next question is coming from Robin Farley. Please announce your affiliation then pose your question.

Thanks. Yes, this is Robin Farley from UBS. Many of my questions have already been addressed. I have one more follow-up regarding the transaction environment. Considering your strong performance in transactions last year and the current market recovery with rising interest rates, how would you assess the opportunities for transactions now compared to the second half of last year? Additionally, could you remind us if there is a specific dollar amount allocated for acquisitions this year due to 1031 exchanges or any other factors we should be aware of? Thank you.

There isn't a specific dollar amount we need to spend on acquisitions this year. We've focused on converting our sales proceeds into the acquisitions made last year, such as the recent sale of the Sheraton Boston to the Hotel Van Zandt. We're in a solid position and don't feel pressured to purchase assets solely to fulfill the 1031 exchange requirements. With the emergence of the Omicron variant in December, we expected a robust pipeline of assets at the ALIS Conference in January, but there haven't been many acquisitions reported. It seems that many have decided to take a step back due to uncertainty about hotel performance. In January, we saw a $105 RevPAR and a strong recovery to $150 to $155 in February, which suggests we might see more properties available in the latter half of the year. However, currently, there are not many assets that pique our interest. Notably, of the seven assets we acquired last year, five were purchased off market. We will keep engaging with hotel owners that align with our interests.

Okay. That’s great. Thanks very much.

Your next question is coming from Anthony Powell. Please announce your affiliation then pose your question.

Hi, it is Anthony Powell from Barclays. Just a question on the dividend which was a nice surprise. How did you get to the $0.03 quarterly number? You didn't have to pay dividend given your NOL, so I am curious, how should we expect the dividend to trend over the next several quarters? Do you look at percentage of FFO, cash flow? Just more detail would be super helpful.

Sure, Anthony. No magic number that we sense. It really is what we are comfortable paying based on the recovery trajectory that we are seeing. It will all depend frankly on how that operational recovery pans out. And obviously our goal is to grow that dividend and get it to a sustainable level. But $0.03 is what we are comfortable with for the first quarter, we will see how operations shape up and what happens in subsequent quarters. We will obviously be authorized by our Board of Directors.

So it could go up here even in the short-term if things continue to improve. Is that a fair assumption?

That is fair.

Your next question is coming from Ari Klein. Please announce your affiliation, then pose your question.

Thanks. Ari Klein with BMO. Maybe on the CapEx front, the Marriott Transformation Program wraps up this year and some CapEx may be assets that have been sold, is the $400 million to $500 million ex-Marriott kind of the right way to think about CapEx beyond 2022? And what are some of the major ROI projects that are being contemplated beyond this year?

Certainly. Let me begin by discussing a couple of significant ROI projects included in that figure. I want to highlight that within the CapEx guidance we provided, $200 million is allocated to two major ROI projects that we expect to yield very attractive returns, specifically double-digit cash on cash returns. The first project is the Ritz-Carlton in Naples, which involves a complete transformation of the resort. We are enhancing every aspect of this fantastic hotel located on the beach in Naples, Florida. We plan to increase the room count from 450 to 474 by combining some existing rooms to boost the suite count from 35 to 92. We are also constructing a new 74-key tower and a significantly larger club lounge. This is vital because club rooms typically command an average annual ADR premium exceeding $220, and previously, we didn't have enough space to sell as many club rooms as the demand indicated. We are very enthusiastic about these improvements in Naples. Additionally, we are adding a new swimming pool, a new pool bar, and completely renovating the lobby. This is partly based on research from focus groups indicating it was time to update the property, which was built in 1985, especially considering that the bathrooms needed a significant upgrade. We are transforming bathrooms from 3-fixture to either 4 or 5 fixtures throughout the hotel. We also want to ensure we are competitive with the upcoming Four Seasons, which is about three years away. Another key investment is the Fairmont Kea Lani on Maui, in Wailea. This is another outstanding resort where we anticipate achieving double-digit cash on cash returns from our repositioning investment of approximately $120 million, enabling us to better compete with the adjacent Four Seasons. This is our outlook on CapEx. As I mentioned previously, in addition to completing the Marriott Transformational Capital Program this year, we also plan to finish and reposition three other properties: the Westin in Denver, the Westin in Georgetown, and the Miami Biscayne Bay Marriott. All these improvements are expected to significantly enhance our yield index due to the capital being invested. We are well on our way and excited about achieving a 3 to 5 point increase in the yield index. We are optimistic that the actual gain will surpass that estimate since a 3-point index represents $22 million. These figures were calculated before the pandemic, and throughout the pandemic, we actively invested in our assets. This initiative aligns with one of our strategic objectives to capture market share. We are confident that as business activities return, our properties will significantly outperform the competition due to the lack of investment in other assets or the necessity for some to be temporarily closed, leading to disruptions. So, stay tuned for updates on this front.

Thanks for the color.

Your next question is coming from Chris Woronka. Please announce your affiliation then pose your question.

Hey, this is Chris from Deutsche Bank. Thanks for taking my question. Jim, as you consider the new cost structure you've implemented and while I understand you're still in the process of hiring employees, we don’t have a clear picture yet of where all the brand standards will land, particularly regarding housekeeping and similar areas across different brands and price points. My question is whether this will be an ongoing situation or if you believe the brands will eventually establish fixed standards and hire staff as needed. I'm trying to assess if there is a potential risk that we might end up needing more labor than anticipated a year from now.

Let me begin the response, Chris, and then I would like Sourav to join in because he has been engaging in discussions at the brand level. We initiated discussions on brand standards before COVID, so this initiative was not solely a result of the pandemic. We actually spoke with our major managers in 2018 and 2019 about this. It has become clear that there is no single brand standard that applies to all hotels. Both of our major managers have experienced substantial reductions in headcount at their headquarters, which significantly affects above-property costs and expenses. Therefore, we are quite confident that we will not see a return to previous levels of spending. With that said, I will let Sourav contribute and maybe discuss some of the recent conversations we have had.

I agree with what Jim mentioned, and I believe there's no risk of cost creep returning, which gives us confidence. Our success in expanding margins before COVID was significant, as we managed to differentiate ourselves from our competitors in this regard, largely by preventing any cost creep. This time, we have implemented zero-based budgeting for every hotel, allowing us a unique opportunity. Many hotels typically focus on operational spending, but our management team can pause to collaborate closely with our asset management and analytics teams to determine the ideal operating model and staffing levels once we return to normalcy. Any position that might be reinstated will go through a strict approval process, and unless there is a clear return on investment associated with that role, we will not approve it. Therefore, we are quite confident that if a position is added back, it will come with an anticipated return; otherwise, it will not be reinstated.

Okay, very helpful. Thanks guys.

Your final question for today is coming from Rich Hightower. Please announce your affiliation then pose your question.

Hey, good morning, guys. Evercore ISI. Thanks for squeezing me in. I guess just to maybe play devil's advocate for one second here on the dividend, at least over the long-term. I mean, certainly in the short-term I totally understand a nominal dividend for sort of technical factors in terms of who can own the stock and so forth, but given that we are as early into the new cycle as we are, there is a lot of investment opportunities probably coming down the pike. You have got significant NOLs that will probably shield you from having to pay a significant dividend for several years. So what is the thought about paying more than a penny than you have to pay once cash flows sort of stabilize? Why focus on the dividend? Do you think investors really care about it at the end of the day?

Hey, Rich. I want to clarify that we did not have a significant amount of net operating losses at the REIT level. Most of our net operating losses are at the TRS level. Therefore, the issue of shielding our taxable income with net operating losses at the REIT level doesn't come up. We plan to use the REIT-level net operating losses we do have to offset any gains on sale. I want to emphasize that whenever taxable income is generated, we will be distributing that as dividends. I just want to make sure this is clear, Rich.

Yes, that is helpful. Yes, thanks for that. And then just more broadly then, just in terms of the opportunity landscape relative to the dividend, not that they have to be mutually exclusive by any means.

Yeah, Rich. I don't think they exclude each other. If you consider the cash outflow related to the $0.03 dividend, it amounts to around $21 million. If you annualize that, it totals about $80 million. Therefore, there is a group of investors that cannot own our stock. With our strong balance sheet and confidence in the recovery, we want to ensure everyone has a chance to benefit from that recovery, which is part of the reason we reinstated the dividend at $0.03.

That is all the time we had for questions today. I would now like to turn the floor back over to Jim for any closing comments.

Well, I would like to thank everyone for joining us on our fourth quarter call today, we appreciate the opportunity to discuss our quarterly results with you. I look forward to meeting with many of you at in-person conferences in the coming weeks and months. Be well and stay healthy, and thank you for your continued support.

Thank you, ladies and gentlemen. This does conclude today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.