Good morning, and welcome to the Host Hotels & Resorts First Quarter 2022 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 laws. As described in our filings with the SEC, these statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed, and we are not obligated to publicly update or revise these forward-looking statements. In addition, on today's call, we will discuss certain non-GAAP financial information, such as FFO, adjusted 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 and our 8-K filed with the SEC, as well as 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. We kicked off the first quarter of 2022 with meaningful outperformance and once again substantially beat all consensus metrics for the quarter. We delivered adjusted EBITDAre of $306 million and adjusted FFO per share of $0.39 during the quarter. All owned hotel pro forma EBITDA of $330 million in the first quarter was just 18% below 2019, and March pro forma hotel EBITDA came in 8% above 2019 driven by significant rate growth at our resorts. Pro forma total revenues in the first quarter increased 10% sequentially over the fourth quarter, while pro forma hotel-level operating expenses grew 5%. The increase in revenues was driven by improvements across rooms, F&B, and other departments. Pro forma RevPAR for the first quarter was $167, an 11% improvement from the fourth quarter as rates continue to increase in our Sunbelt markets and hold up at our urban hotels. This is the highest quarterly RevPAR we have seen since the onset of the pandemic, bringing our RevPAR to approximately 18% below first quarter 2019 levels. Our recent acquisitions, dispositions, and renovated properties continued to contribute to our performance during the first quarter and notably, we had five hotels with ADRs of over $1,000. Preliminary April RevPAR is expected to be approximately $225 to $230, which is up slightly from our March RevPAR. It is worth pointing out that our preliminary April monthly RevPAR represents the first time that our monthly RevPAR is expected to exceed 2019 levels since the onset of the pandemic. However, consistent with historical monthly trends, we expect to see a pullback in May and June relative to 2019 levels. In addition to Maui and San Diego, we are pleased to see urban markets such as New York, Washington, D.C., and San Francisco driving the outperformance against our forecast. In short, all business segments and markets are trending in a positive direction, and we are very pleased with our performance. Subsequent to the quarter end, we sold the 1,780 Sheraton New York Times Square Hotel for $373 million or 28 times 2019 EBITDA. When calculating the EBITDA multiple, we included $136 million of estimated foregone CapEx over the next five years. In connection with the sale, we are providing a $250 million bridge loan to the purchaser. In addition, we sold a 243-key hotel, Eve Miami, for $50 million, including $1 million for the FF&E replacement funds or 23.2 times 2019 EBITDA. When calculating the EBITDA multiple, we included $9.5 million of estimated foregone CapEx over the next five years. This brings our 2021 to 2022 year-to-date total dispositions to approximately $1.4 billion at a blended 17.8 times EBITDA multiple, including estimated foregone capital expenditures of $435 million, which compares favorably to our $1.6 billion of acquisitions at a blended 13 times EBITDA multiple. Our 2021 acquisitions continued to perform substantially ahead of our underwriting expectations. Based on first quarter performance, EBITDA from our seven new hotel acquisitions in two golf courses is on track to meaningfully outperform our underwriting expectations. 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 $4.9 billion of assets at a 17 times EBITDA multiple, including $938 million of foregone capital expenditures over the next five years. Comparing pro forma 2019 results for our current portfolio to 2017, we have increased the RevPAR of our assets by 11%, EBITDA per key by 25%, and EBITDA margins by 190 basis points and avoided considerable business disruption associated with capital projects over the past two years. As we continue to evaluate capital allocation opportunities, our efforts will remain focused on assets that have the potential to bolster our EBITDA growth profile. Turning to first quarter operations, our total portfolio pro forma revenue was up 10% sequentially to the fourth quarter, driven by 16% rate growth. Transient revenue was up over 1% compared to the fourth quarter, and rate was up 18%. Putting this into perspective, first quarter transient room revenue was 97% of first quarter 2019. Transient was again driven by our Sunbelt and Hawaiian hotels, where revenue was up 17% sequentially, with a 21% improvement in rate, and once again exceeded prior peak levels for the fourth quarter in a row. Drilling down to resorts, outperformance continued as ADR grew by 48%, leading to a transient revenue increase of 42% compared to 2019. Our 1 Hotel South Beach and Four Seasons, Orlando grew transient revenue over $10 million each with ADR up 60% to 2019. Group business continued to improve at our hotels during the first quarter. Group revenue was up 33% and driven fairly equally by rate and demand growth compared to the fourth quarter. Despite a weak January, we were encouraged by net booking activity in the quarter, which resulted in 682,000 group rooms sold for the quarter. We saw meaningful improvement in banquet and AV revenue as group business continued to return. In the first quarter, banquet and AV revenue increased by $24 million, up 17% over the fourth quarter. As groups get back to in-person meetings, we expect the trend of higher out-of-room spend to continue. Looking forward to our expectations for group in 2022, we currently have 3 million definite group room nights on the books, which compares favorably to the 2.7 million group room nights we had on the books for 2022 as of the fourth quarter after adjusting for our recent dispositions. Group rate in 2022 is up 4% compared to the first quarter of 2019, a 300 basis point increase over the last quarter, with 1 million definite group room nights on the books in the second quarter. This represents 82% of second quarter 2019 actual group room nights. Last quarter, our 2022 definite group room nights on the books represented 60% of 2019 actuals. Adjusted for our transactions and including bookings from the first quarter, 2022 definite group room nights now stand at approximately 70% of 2019 full year actuals. For the remainder of the year, 2022 definite group room night pace is down 14% compared to 2019, while total group revenue pace is down just 8% compared to 2019. Sourav will get into more detail on business mix and markets in a few minutes. In addition to delivering significant operational improvements, we 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 hotels through comprehensive renovations, and strategically allocating capital to development ROI projects. As a reminder, we are targeting a range of $147 million to $222 million of incremental stabilized EBITDA on an annual basis from the initiatives and projects underpinning our three strategic objectives. $100 million to $150 million is expected to come from potential long-term cost savings over time based on 2019 revenues from redefining the operating model with our managers. We have achieved approximately 60% to 70% of these savings to date. Another $22 million to $37 million of incremental stabilized EBITDA is related to our goal of gaining 3 points to 5 points of index growth at the 16 Marriott transformational capital program hotels and eight other hotels where comprehensive transformational renovations have been recently completed or are underway. Starting with the Marriott transformational capital program portion of our renovations, during the first quarter, we completed the Marina del Ray Marriott and the Houston Marriott Medical Center. This brings the number of completed properties to 12 out of 16 in this program with 89% of the work complete, and we expect to be substantially complete by the end of 2022. The remaining Marriott transformational capital program properties include the Boston Copley Marriott, the San Diego Marriott Marquis, the JW Marriott in Houston, which will be substantially completed by year-end, and the Marriott Metro Center in Washington, D.C., which we expect to complete in the first half of 2023. We expect to receive over $11 million in operating profit guarantees from Marriott this year related to these renovations. In total, we expect to invest approximately $750 million on the Marriott transformational capital program assets. As a reminder, we were planning to invest approximately 70% of the $750 million as part of our routine cycle-based renovations. The remaining 30% is ROI-focused CapEx and includes renovation scopes brought forward from future years to create comprehensive transformational renovations. We believe these renovations allow us to capture incremental market share, as is the case at the Ritz-Carlton Amelia Island, where we have seen a RevPAR index share gain of 8 points since May 2021. The Ritz-Carlton Amelia Island is now the number one hotel in its competitive set, up from 3 or 4 historically. In addition to the 16 Marriott transformational capital program assets, we have eight hotels where we have completed or are in the process of completing major renovations. The completed hotels include the Dons CeSar, Hyatt Regency Maui, and Hyatt Regency Coconut Point. The Ritz-Carlton Naples Beach Resort and Miami Marriott Biscayne Bay are both expected to be completed by year-end, and the Westin Denver downtown, the Westin Georgetown in Washington, D.C., and the Fairmont Kea Lani in Maui are scheduled to be finished by mid-2023. In total, we expect to invest approximately $420 million on these eight assets over four years, $157 million of which we expect to spend in 2022. Finally, we are targeting another $25 million to $35 million of incremental stabilized EBITDA from four major development ROI projects. During the first quarter, we completed and opened the two-acre River Falls Aquatics Park and substantially completed the 60,000 square foot meeting space expansion at our Orlando World Center Marriott. Both of these projects came in ahead of schedule and under budget. As mentioned, by year-end, we expect to complete the expansion at the Ritz-Carlton Naples Beach Resort, which adds to the Andaz Maui Villas and AC Scottsville North, both of which are complete. These four assets make up the current development ROI projects in our third strategic objective, and we continue to identify new development projects that will unlock value within our portfolio. In total, we expect to invest $216 million on these four assets. Stabilization of these projects is expected to occur within two to three years of completion, but we are seeing early signs of outperformance. In addition to the incremental stabilized EBITDA from our three strategic objectives, we expect approximately $120 million to come from the seven hotel and two Golf Course acquisitions we completed in 2021, all of which are meaningfully outperforming our underwriting for 2022. In closing, we continue to improve the quality of our portfolio with our recent dispositions, and we are very pleased with the $1.6 billion of acquisitions we closed on in 2021. As the lodging recovery continues to accelerate, we believe Host is very well positioned to capture a greater share of demand given the investments we have made in our hotels, our improved portfolio quality, and our balance sheet strength. With that, I will now turn the call over to Sourav.

Thank you, Jim, and good morning, everyone. Building on Jim's comments, I will go into detail on our first quarter top line performance, margins, and balance sheet before wrapping up with an update on our dividend. Starting with top line performance. First quarter pro forma RevPAR of $167 was the highest it has been since the onset of the pandemic. The quarter was a tale of two months, with March RevPAR of $221 more than double that of January. Improvements in the quarter were driven by leisure travel in Sunbelt markets and Hawaii. These markets achieved a first quarter RevPAR of $251, a 26% increase over the fourth quarter. Our urban markets experienced the brunt of the Omicron impact in the first half of the quarter but swiftly recovered, ending March on a high note. For comparison, March RevPAR at our urban hotels was $132, up nearly 25% compared to the fourth quarter of 2021. Turning to transient mix, holidays in the first quarter drove steady sequential growth in both occupancy and transient ADR, with President's Day achieving the highest holiday occupancy since 2019, which was driven by our Sunbelt market. Our urban hotel achieved 76% occupancy over Easter, which is nearly double that of the MLK holiday weekend. Holiday occupancy in our urban markets outperformed our Sunbelt markets for the second time since the onset of the pandemic, with a rate improvement of 26% over the MLK holiday weekend. Business transient revenue was up 2% in the first quarter, with a 4% increase in rate. Despite the impact from Omicron and winter storms in January, business transient room nights set a recovery record in March, breaking the 100,000 level, and encouragingly, half of those room nights sold were in urban markets. For comparison, that represents a 28% increase over October 2021, which had 78,000 business transient room nights and was the previous high watermark. Providing a little color on a few of our urban markets, in San Francisco, we saw leisure demand starting to pick up in March. Business transient volume was slow for the first two months of the quarter, but our hotels saw a significant spike in March from consulting firms and tech clients. In New York, traditionally strong leisure periods have rebounded to levels approaching 2019. While transient demand remains short-term in nature, we are starting to see the booking window stretch beyond 30 days. In March, business transient rooms in New York reached a post-COVID high, and as offices continue to reopen, we expect business transient demand to continue to ramp. Early in the first quarter, Washington, D.C. experienced declines related to cancellations, but all of our hotels saw a meaningful improvement in demand in March due to Cherry Blossoms and Spring Break. As government offices reopen, we expect business volume to continue to improve. Turning to group, revenue increased 33% over the fourth quarter, driven by 14% demand growth, combined with a 17% improvement in rate. Most of the room night increase came from our hotels in Orlando, Maui, and San Diego, where we saw incentive business from corporate groups come back into the mix. As it relates to overall group business, banquet and catering revenue was up 17% over the fourth quarter, clearly showing that groups are willing to spend when they meet in person. Banquet revenue per group room night exceeded 2019 levels in the first quarter for the first time in the recovery, ending 7% higher, with March absolute banquet and catering revenue down just 10% compared to 2019. Corporate group revenue increased 41% over the fourth quarter, driven by 17% demand growth and a 21% increase in rate. Corporate group room nights picked up meaningfully each month in the quarter and ended at 70% of 2019 levels in March. Orlando and San Diego hotels drove most of the demand growth in this sub-segment. Association groups also showed steady sequential improvements, with first quarter association group room nights increasing 26% over the fourth quarter with a 13% increase in rate. Shifting gears to expenses, total pro forma expenses were down 17% compared to the first quarter 2019, in line with the total revenue decline. Staffing at our hotels remains at 94% of desired levels based on business volumes versus 97% historically. Hotels had paused on hiring during Omicron and were unable to keep up as demand surged back in February and March. While our hotels continue to fill open roles, a lag between demand and staffing levels still exists. This has acted as an offset to wages and benefits expense quarter-over-quarter. Briefly touching on our efforts to redefine the operating model, we have made meaningful progress on evolving brand standards with our operators. Marriott recently announced over 200 brand standard divisions that aim to reduce costs, align standards across brands and segments, enable greater operational flexibility, and eliminate outdated standards. Some examples include removing alarm clocks, printed compendiums, and premium channels from guest rooms. Our operators have also moved to residential-style amenities in luxury hotel rooms and revamped the food and beverage options and hours of operation in many hotels to align with customer preferences. We expect brand standards to continue to evolve as we work with our operators to enhance efficiencies. Taken together, a strong top line and expense controls have allowed our margin to continue to meaningfully improve. Our pro forma hotel EBITDA margin in the first quarter was 31.4%, which is just 10 basis points below that of the first quarter 2019. For comparison, this represents a 350 basis point increase compared to our fourth quarter hotel EBITDA margin, which was 27.9%. First quarter margin improvement was primarily a result of strong ADR and cancellation revenue. As demand and rate quickly recovered from a decline in January, March had the highest monthly hotel EBITDA margin in Host’s history for today's pro forma portfolio at 41%. Turning to our outlook for 2022, we are still unable to provide full-year operational guidance given the continued volatility surrounding COVID. That said, we believe sequential quarterly RevPAR improvements will continue as declines to 2019 diminish throughout the year. We expect second quarter RevPAR to be between $195 and $205, which is down 8% to down 3% relative to 2019. This RevPAR range implies an adjusted EBITDAre range of $375 million to $410 million for the second quarter. We expect sustained strength in leisure, as well as business transient and group demand, to continue accelerating in our urban markets as companies get back on the road and groups return to in-person meetings. We have seen a recovery in international travel, particularly from Canada, Germany, and the U.K. New York remains the top destination market followed by San Francisco and Seattle, and we expect sequential improvements in international demand over the course of this year. Given the cadence of the lodging recovery, it is difficult to provide an accurate forecast for the year. While we expect sequential RevPAR improvements relative to 2019, seasonality and changing market and business mix are expected to lead to lower RevPAR and margins for the second half of the year compared to the second quarter. For reference, the third quarter has typically been our weakest quarter of the year, and as is historically the case, we would expect third-quarter RevPAR and margins to be below those in the second quarter. Turning to our balance sheet and liquidity position, our weighted average maturity is 5.3 years at a weighted average interest rate of 3.4%, and we have no significant maturities until 2024. After accounting for our two hotel dispositions in April, we now have $2 billion in total available liquidity, comprised of approximately $439 million of cash, $162 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 second quarter dividend of $0.06 per share on Host’s common stock, a 100% increase over the prior quarter. 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 dividend to a sustainable level. To conclude, 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 performance of our portfolio.

Our first question is coming from Chris Woronka from Deutsche Bank. Your line is live.

Thanks for all data points. I guess I'll ask the obvious one, which is the 2Q guidance with what you said about April. And I understand there's normally a seasonal drop in May and June. But I think the basic math is suggesting a bigger-than-normal drop, like a double-digit drop versus '19. Can you just give us a little bit of color on how you're thinking about that?

Sure. Chris, we have talked a lot about the Q1 performance and April performance internally at Host. And we just don't think we're going to be able to sustain the level of rate that we achieved in Q1 and in the month of April at our resort properties. The spring break that occurred this year was off the charts. It really was very, very strong. And we expect to see some moderation back to the mean as we see a rotation from spring breakers back into the urban markets with group and business transient coming back. So that's the reason why we brought the guidance down for Q2. Strong April, but we expect May and June to moderate. May is definitely going to be lower than April; June may be slightly above May at this point in time.

Your next question is coming from Neil Malkin from Capital One Securities. Your line is live.

Jim, a question for you, kind of on the same line. But in terms of maybe just leisure resorts or probably more so the other urban or group hotels. Can you just talk about what out-of-room total spending looks like? I mean, at least from our expectations, it's continued to just be really strong. And I know that people you've, I think, alluded to, even though rates may not be sustainable at some of these resorts, the other side of the revenue equation should pick up as group and various other core travel segments come back. So can you just talk about what you're seeing there with total out-of-room spending on a per-occupied level?

Sure. In the first quarter at our 16 resorts, we achieved an outlet revenue per available room of $180, setting a new record for our portfolio, and likely for the industry as well. When we analyze the overall revenue, it was only 7% below the first quarter of 2019, primarily driven by resort performance, which improved by over 40% on a pro forma comparison to the same quarter in 2019. Additionally, as Sourav mentioned in his remarks, banquet revenues at our hotels from group events increased significantly, by $24 million compared to the fourth quarter, with banquet earnings per group room night surpassing 2019 figures by 7%. Currently, the corporate groups signing contracts are cautiously managing their spending commitments for both room and out-of-room expenses due to the impact of Omicron in January and February, leading to higher attrition and cancellation fees. However, once these groups arrive at the hotels, they are spending considerably more than anticipated, complicating our forecasting for the future. This uncertainty is why we are hesitant to discuss the second half of the year while focusing on the second quarter at this time.

Yes, I think so. I'm just curious. I understand the decline in RevPAR, but I want to clarify that you expect, especially considering your guidance on group bookings or room nights, that out-of-room and non-room related revenue will continue to rise, correct?

Absolutely. So I only touched on outlet revenue and banquet revenues. I mean, we have seen a very strong upward trajectory on golf revenues and on small revenues; parking is relatively flat, and we expect that to pick up as people get back on the road and start traveling again. We see no downturn whatsoever in golf or small revenues. The one area that did have an impact on our first quarter performance were attrition and cancellation fees of $26 million, and that's relative to $13 million that we collected in Q1 of 2019. So I wouldn't expect to see that level of cancellation and attrition fees going forward, but the other out-of-room spend should continue to grow.

Your next question is coming from Smedes Rose from Citi. Your line is live.

I just wanted to ask, Sourav, as you think about, I guess, margins going forward, you noted that margins came very close to pre-pandemic levels and RevPAR is still quite a bit below. As RevPAR continues to improve, even if it's somewhat seasonal and more choppy going forward, how do you think about the flow-through of incremental RevPAR gains? And would it be fair to assume that they might be more occupancy-driven at this point versus rate-driven? Or how are you thinking about that?

I would say take a look at sort of how we performed in 2019 on a quarterly basis. And given that we have come back much quicker than expected in terms of just getting back to normal seasonality. And that's obviously what's impacting our Q2 guidance. When you look at margin performance, it would be very similar to what we saw back in 2019. The only thing I would say is obviously, when you are growing revenues, rooms revenue is more driven by a rate that will flow through better. So in other words, you can expect sort of Q2 margins, no different from sort of the fourth quarter of '19, where it is slightly better than the first quarter. But then if you look at the third quarter of 2019, there is a marked difference in what happens in margins just because rates drop. Back in '19, if I remember correctly, rates dropped close to like 10%, and there was a margin drop of about 600 basis points. So similar in terms of seasonality is what we would expect. So you would still expect sequential top line growth relative to '19, but you will see the absolute revenue numbers sort of follow the same patterns as we saw back in 2019.

And can I just ask you one quick question? You mentioned 3 million group rooms on the books for '23 that looks like somewhere between maybe 18 points to 19 points of occupancy at this point. Where would you be now pre-pandemic going into the following year in terms of sort of points of occupancy on the books?

No. What I would say is where we were pre-pandemic is about 3.9 million group room nights at the same time.

Okay.

But what's important to keep in mind here is we're talking about the full year, right? So Q1 obviously was impacted because of Omicron. The way to think about it is more the remainder of the year. The remainder of the year, we have 2.3 million group room nights. So that's Q2 through Q4. At the same time back in 2019 for the remainder of the year, we had 2.7 million group room nights. Does that make sense? So obviously, the dynamics are a little different...

Your next question is coming from Bill Crow from Raymond James. Your line is live.

Jim, just to put a little finer point on the whole sequential discussion. How much of this change in RevPAR is mix driven more group on the books for June, for example, than there was in the first quarter; so more mix, more business transient group? Or how much of it is just travel demand in some of those Sunbelt markets that caused all the compression and the pricing is just being more dispersed to New York and Boston and Chicago?

I believe it’s a mix of several factors. I don’t want to suggest that our 16 resorts in those five properties with an ADR exceeding $1,000 for the quarter are going to see a drastic drop; they won’t. The demand remains strong, and we continue to observe it. However, as we move past April and into June, we will encounter seasonal variations tied to the resorts. For instance, properties like the 1 Hotel South Beach in Miami, the Ritz-Carlton in Naples, and the Four Seasons in Orlando will experience natural seasonality that we expect will moderate demand. Additionally, we are noticing a resurgence in group and business transient travelers, which will likely lead to a RevPAR that, overall, is lower than what we experienced in the first quarter and during April. We are pleased to see this business return and are excited about the strength of group and business transient travel. Our resort portfolio, which benefited from $1.6 billion in investments last year, has significantly exceeded our expectations. We believe this positions us well as business transient and group travel recovers. Therefore, it’s a combination of all these elements.

If I could just ask a follow-up on kind of the health of the consumer. I'm curious whether you're seeing points redemptions picking up? And if so, does that represent some pushback on these rates at the resorts or maybe a concession that the inflation is starting to eat away at the consumers' wallets?

Now I'll let Sourav get into it, but the short answer is no. We have looked at redemption numbers and we don't think that, that is having an impact at all at this point in time. In fact, for Alila Ventana, we're delighted that we have that hotel as part of the world of Hyatt because the redemption numbers at that property really go a long way to allowing us to drive outsized RevPAR just given the small number of rooms that are there. And when we can really revenue manage that down to the last room, that is how our redemption rate is set. So it's been very positive for us. And Sourav, I don't know if you want to add a little bit of color on what we're seeing.

Sure. Net-net, it's actually incremental for us because if you think about sort of where we are getting those redemption room nights, they're primarily in the resort destinations, which have very high occupancy, and the majority of our hotels in our portfolio are high redemption hotels, and we actually get a higher reimbursement rate at those hotels. And obviously, at a higher occupancy threshold, it ends up being incremental in terms of revenue that's being driven by those redemption of room nights.

Your next question is coming from David Katz from Jefferies. Your line is live.

I wanted to you've talked quite a bit about the strength of the balance sheet. And I think the presumption is that there would be other properties out there that would be viable targets in the next 12 months. And I'm just wondering if we can expand that view a little bit whether there are portfolios or even whether corporate M&A would be within or outside the boundaries.

We are continuously assessing investment opportunities, David. From our perspective, as we observe the current state of the market, we notice two main trends. The pricing expectations for several properties available earlier this year have exceeded our limits, making it challenging to justify the underwriting. Additionally, other assets we are interested in acquiring are currently not for sale, as owners are holding off until their cash flow improves. We are in a strong position, without a doubt, with $2 billion in available liquidity today, which will increase as the year goes on. This liquidity places us in an excellent position to act as opportunities arise later this year, allowing us to be the preferred buyer as we were last year, enabling us to make all-cash deals without the concern of the current debt capital market's volatility due to reduced loan-to-value proceeds and rising interest rates. Patience is necessary at this moment. We are prepared to utilize our balance sheet, having proactively invested $1.6 billion early in the cycle last year. While we are open to various possibilities, it is challenging to predict what may become available that aligns with our underwriting criteria.

And if I can follow up briefly. Just with respect to the kinds of markets where you would or wouldn't be, there's an argument, right, we've that we see where companies are buying more Sunbelt-oriented. I wonder if there isn't a contrarian view where some markets that may be under some pressure or duress today or underperforming today might be some places to hunt for value. I just wonder what your thoughts are on that.

Let me start by saying that we don't exclude any particular market. Our decisions are based on our assessment of value and expected performance moving forward. I agree that the focus continues to be on the Sunbelt markets, which I believe will remain consistent. Resorts, in particular, are appealing for several reasons, primarily the very low supply levels in these markets. However, if we come across opportunities in some markets that are currently underperforming and we find them to be fairly priced, we believe we could add value, and if those investments could enhance the EBITDA growth profile of our portfolio, we would certainly be willing to pursue those transactions.

Your next question is coming from Aryeh Klein from BMO. Your line is live.

Just following up on the resort rates. Clearly, it seems like there's some seasonality at play over the next few months. But as you look further ahead and comps begin to get much tougher kind of in the second half of the year and I guess the beginning of next year, are you expecting rates to actually decline a bit?

It's Sourav. I believe that while rates may moderate, much of this will be attributed to natural business and market shifts as demand moves to different areas, rather than reflecting the strength of leisure rates in those specific markets. We still anticipate, based on the demand we are observing for the next quarter and the second half of the year, that leisure rates will remain quite robust. In fact, we think they will hold strong well into next year due to significant pent-up demand. Once international borders fully open to the U.S., we expect a substantial amount of demand to help maintain those rates. It is challenging to predict how much the rates will be affected as market dynamics evolve, but we remain confident about leisure rates for the remainder of this year and into the next.

Anthony Powell from Barclays, you can go ahead.

Sorry to keep focusing on this leisure performance in May and June, but I kind of wanted to ask another question on that. So we've seen strong pricing and demand on holiday weekends there. Your two weekends coming up at Memorial Day and also June 1, just checking some of your properties on both of those weekends. They seem to be asking for very high pricing. So what are you seeing in the booking window for those two specific weekends? And are you seeing any, I guess, incremental weakness or softness or price resistance as you approach those time periods?

Specifically for Memorial Day, and this is, again, going back to still the short-term lead time, we are seeing a key pace of 12% above 2019 levels. So still holding very strong for holidays. Sunbelt markets are pushing rates really nicely with rates on the books, up 44% versus the same time in 2019. But overall, still very strong performance for the upcoming holidays.

And what about June themes?

I don't specifically have June themes numbers, but we can certainly get back to you.

So I guess you're not really seeing, I guess, an upcoming week holiday weekends, any kind of, I guess, relative price softening versus what you saw in April or even presence today, is that fair?

That's fair. We're not seeing any softening.

Your next question is coming from J.J. Kornreich from SMBC. Your line is live.

It's Jay. But I am a follow-up to a previous question. With the strong recovery in business transient urban demand, it was interesting to see your Boston and New York as dispositions. So kind of just curious how you think about your asset allocation plan and we may shift back to preserving your urban footprint, which is recovering versus maybe disposing in those markets and focusing more on the outperforming Sunbelt and resort assets.

Sure, Jay. The decision to sell the properties in Boston was influenced by unique circumstances surrounding each asset. It's important to note that we still maintain a strong presence in both markets. In Boston, we have the Boston Copley Marriott, which is undergoing a complete renovation as part of the Marriott transformational capital program. This demonstrates our commitment to the Boston market. However, the Sheraton's location in the Back Bay, combined with its size and the State of Massachusetts' plans to sell the Hein Center, which the hotel relied on for group business, played a significant role in our decision. The hotel lacks sufficient meeting space for groups, and the group business has largely shifted to the main convention center. Additionally, the Sheraton required a considerable capital investment due to a significant amount of deferred CapEx. It was more logical for us to sell that asset. The same reasoning applies to the Sheraton in New York. We are pleased with the condition of the New York Marriott Marquis in Times Square and the Financial Center Marriott in Downtown New York, both of which are in excellent shape and part of the Marriott transformational capital program. These assets are well-positioned to excel as the recovery progresses, while the Sheraton, being an older hotel, needed substantial capital investment. In fact, the Sheraton was anticipated to lose $15 million at the EBITDA line in 2022. Therefore, these divestitures will help enhance the EBITDA growth profile of the company by allowing us to reinvest the capital from those sales into our existing portfolio through ROI projects or pursue additional acquisitions as part of our capital allocation strategy.

And if I could just ask 1 follow-up. As we've seen a nice recovery in the business trends in all the urban markets, can you just give us a little perspective on how San Francisco is shaping up? And how you expect that market to perform in the second half of the year?

Yes, San Francisco is actually performing better than we had anticipated. For instance, the San Francisco Marriott Marquis achieved an occupancy of 1,000 rooms per night during midweek for the last three weeks of March. Bookings for the last week of April are nearly on par with 2019. Overall, the outlook for San Francisco in terms of bookings is quite positive.

Your next question is coming from Floris Van Dijkum from Compass Point. Your line is live.

Looking at your EBITDA numbers, especially in the resort markets compared to 2019, it's clear that the resorts are performing well. However, San Francisco and DC seem to be struggling, while New York, although not large, has also faced challenges. Considering the recovery in urban markets, what is your perspective? While there's some discussion about sequential growth, you've already reached 83% of your hotel EBITDA in the U.S. for the first quarter. Some competitors believe they can reach that by the fourth quarter of this year. Is that a potential you foresee? I understand you're not providing guidance, but how confident are you in achieving those levels by the end of this year?

I don't think we're really comfortable talking about the second half of the year. It's very difficult at this point in time to forecast how this recovery is going to continue to unfold. So much of the business is being booked short-term, although we are starting to see the booking window extend. As I mentioned, a very valid point is on the corporate group business that we're seeing. The contracts that are being signed are for lower levels of food and beverage spend and smaller numbers of attendees that are showing up because they just don't want to be dealing with attrition and cancellation fees if they have to cancel or if there is another event, as we saw in January and February. So at this point in time, I think we're confident and we feel really good about what we're seeing in terms of group bookings for the balance of this year. We had a nice pickup over Q4, where we had 2.7 million definite on the books at the end of Q1; we had 3 million definite room nights on the books. That compares, I think, to 3.9 million in Q1 of 2019 for 2020. So we continue to close the gap going forward and the same with business transient. It's coming back. We think it's going to continue to evolve as offices open. And we feel good about it, but we're just not in a position to give any guidance for the balance of the year.

I would add, if there is any indication in terms of what we did in March as a presentation of where we see the trends heading. I think we mentioned in our prepared remarks how March was over 100,000 room nights, which is now the high watermark. So if you remember back in 2021, the last high watermark was at 78,000 room nights in October of '21. So that's a 28% increase. What we can say is we see that trend continuing into April. And as Jim said, since the lead times are short, it's difficult to have visibility on BT well into the second half, but the trends are at least positive. And March ADR for BT was $223, and that's down only 1.6% compared to 2019.

Your next question is coming from Chris Darling from Green Street. Your line is live.

Just to put a finer point on what you're seeing on BT and group demand. I'm hoping you could just walk through how weekday occupancy specifically is trending relative to '19 in some of your major urban markets.

So for the major urban markets, the weekday occupancy is still lower than where we would like it to be, but it's trending in the right direction. I think that's the important point. From the last time we spoke on the fourth quarter call, there has been like a 4 point to 5 point improvement in midweek occupancies. So that's where we have been focused. Weekend occupancy has obviously improved meaningfully in those urban markets, but that trend continues.

And I don't know if you have the numbers in front of you, but just curious how that might compare to kind of pre-COVID levels.

We are still down, I would say, about sort of high double digits, 18, 20 percentage points in occupancy in those markets.

Thank you. That concludes our Q&A session. I will now hand the conference back to Jim Risoleo, Chief Executive Officer, for closing remarks. Please go ahead.

Thank you, and I would like to thank everyone for joining us on our call today. We appreciate the opportunity to discuss our quarterly results with you. And we all look forward to meeting with many of you in person in the coming weeks and months. We really appreciate your continued support. Have a great day.

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