Earnings Call Transcript - HST Q3 2022

Operator, Operator

Good morning, and welcome to the Host Hotels & Resorts Third 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.

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, 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, 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.

Jim Risoleo, President and Chief Executive Officer

Thank you, Jaime, and thanks to everyone for joining us this morning. We delivered strong performance during the third quarter, marking a number of milestones in the recovery. Total food and beverage and group revenues exceeded 2019 for the first time since the onset of the pandemic, and our EBITDA margin was 250 basis points better than 2019. During the third quarter, our adjusted EBITDAre was $328 million and our adjusted FFO per share was $0.38. Our all-owned hotel EBITDA of $341 million in the third quarter was 15% above 2019, driven by continued rate strength, elevated out-of-room revenues, and tight expense controls. All-owned hotel revenues in the third quarter increased 4.9% over the third quarter of 2019 while all-owned hotel operating expenses were up only 1.2%. All-owned hotel RevPAR for the third quarter was $192, a 1.4% improvement over the third quarter of 2019. As a reminder, this is now the second consecutive quarter RevPAR has exceeded 2019 levels since the onset of the pandemic. While macroeconomic concerns continue to dominate the headlines, we are not seeing any signs of weakness in our business. Looking back to 2008, the banking system is in good shape, leverage levels are reasonable, and consumers still have $1.7 trillion in excess savings with the majority concentrated in the top income brackets. This gives us confidence that recovery in the lodging industry is sustainable. In a poll released by the Global Business Travel Association last month, the majority of companies indicated that they are not limiting travel specifically due to economic concerns and 78% of the participants expect volumes to increase in 2023. Consistent with normal seasonality in shifting business and market mix, we expect fourth quarter nominal RevPAR to be slightly above that of the third quarter as well as above the fourth quarter of 2019. Our recent acquisitions continue to contribute to our outperformance and are substantially ahead of our underwriting expectations. Based on updated expectations for full-year 2022, EBITDA from our seven 2021 hotel acquisitions is expected to be approximately 100% above our underwriting expectations, already putting us better than our targeted stabilization range of 10 to 12 times EBITDA. Subsequent to the quarter-end, we acquired the Four Seasons Resort and Residences Jackson Hole, a 125-room luxury resort in Jackson Hole, Wyoming, for approximately $315 million. The acquisition price represents a 13.6 times EBITDA multiple, whereas a 6.6% CAP rate on 2022 estimated results is expected to be one of our top three assets based on full-year 2022 results, with an estimated RevPAR of $855, a 1430 RevPAR, and an EBITDA per key of $185,000, further improving the quality of our portfolio. The resort is one of only a handful of luxury ski-in/ski-out resorts in the United States. It sits on 6.3 acres in Teton Village, just steps from the gondola at the base of the Jackson Hole Mountain Resort, one of the top-rated ski destinations in the country. The resort is located 20 minutes from downtown Jackson and is in close proximity to Grand Teton and Yellowstone National Parks, a unique feature making it a year-round destination where future supply is expected to be severely restricted. The resort has 125 oversized rooms and suites with average approximately 650 square feet, featuring places, balconies, and dramatic views of the surrounding mountains and valleys. The property also features an additional 44 private residences which are not part of our ownership, ranging in size from 1700 square feet to 3700 square feet. Of the 44 residences, 30 currently participate in a rental program through the resort. From 2014 through 2019, the resort had a RevPAR CAGR of 5.8%, significantly outperforming the ultra-luxury set, which had a RevPAR CAGR of 4.3% over the same time period. The resort, which opened in 2003, underwent a comprehensive guest room renovation in 2022 and no disruptive capital expenditures are expected in the near term. In 2015, $15 million or $120,000 per key was invested in the property. In addition, the Jackson Hole airport is undergoing a $65 million renovation and expansion which is scheduled to be complete at the end of this year. In 2021, non-stop flights from six cities have been added to better accommodate year-round demand, shrinking shoulder seasons, and increasing visitor growth. As is typically the case, we took a conservative approach when underwriting this asset, and we believe there is performance upside beyond 2022. As I just mentioned, earlier this year the resort underwent a comprehensive guest room renovation, while the Jackson Hole airport was closed for approximately three months. By continuing to grow year-round occupancy to historical levels and repositioning the food and beverage outlets in the public spaces, we expect the resort to stabilize at approximately an 11 to 13 times EBITDA in the 2026 to 2028 timeframe. With built-in winter and summer demand generators, a lack of competition, and no new supply on the horizon, we believe the Four Seasons Jackson Hole is positioned to outperform over the long-term. On the distributions front, during the third quarter, we sold the 254-key Chicago Marriott Suites Downers Grove for $16 million. The hotel is expected to need $15 million in investments over the next five years. Looking back on our transaction activities since 2018, we have acquired $3.5 billion of assets at a 13.7 times EBITDA multiple and disposed of $4.9 billion of assets at a 17 times EBITDA multiple, including $954 million of estimated foregone capital expenditures. Impairing all-owned hotel 2019 results for our current portfolio to 2017, we have increased the RevPAR of our assets by 12%, EBITDA per key by 26%, and EBITDA margins by 190 basis points, while avoiding considerable business disruption associated with capital projects. Turning to third quarter operations, our all-owned hotel revenue was up nearly 5% compared to the third quarter of 2019, driven by 16% rate growth. We estimate that Hurricane Ian impacted our third quarter RevPAR growth by 40 basis points and all-owned hotel EBITDA by $3 million when comparing it to the third quarter of 2019. The majority of the impact came from Hyatt Regency Coconut Point and the Ritz-Carlton, Naples. We expect fourth quarter RevPAR growth to be negatively impacted by 250 basis points, while adjusted EBITDAre will be impacted by $17 million. Despite a brief loss of commercial power and damage to the properties' grounds, pools, and amenities, the Hyatt Regency Coconut Point remained open to first responders. The hotel is expected to reopen to guests in mid-November, and we expect the water park to reopen in the second quarter of 2023. The Ritz-Carlton, Naples beach is expected to remain closed for the remainder of the year and into 2023. A phased reopening strategy is being evaluated, and we will provide additional information when it is available. From an insurance perspective, our deductible is limited to $15 million, and we expect to collect business interruption insurance, but it is still too early to estimate when we will receive those payments. As we turn back to the third quarter results, transient revenue was up 2% compared to the third quarter of 2019, and rate was up 25%. Growth continues to be driven by our Sunbelt and Hawaiian properties, which achieved double-digit rate growth over 2019 for its sixth consecutive quarter. Our resort properties continue to outperform, with transient revenue up more than 30% compared to the third quarter of 2019, driven by 64% transient rate growth at our 16 resorts. We have four resorts with transient rates above $1000 for the quarter, and this marks the second consecutive quarter where our newly acquired Alila Ventana Big Sur achieved transient rates above $2000. Our urban and downtown hotels saw continued progress, with 2% transient demand growth over the second quarter, and they are now more than 8% above the third quarter of 2019. Turning to group, business continues to surge back at our hotels during the third quarter. Group revenue was up over 3% in the third quarter of 2019 for the first time, driven by 6% rate growth. In the third quarter, our hotels sold 991,000 group rooms, just 2.6% behind the third quarter of 2019, and we continue to be encouraged by net booking activity in the quarter. For the full year 2022, we currently have 3.7 million definite group room nights on the books, with an increase of 200,000 room nights compared to the second quarter. This represents approximately 82% of 2019 actual group room nights, up from 80% last quarter. Group rates on the books for 2022 are up 6% compared to the third quarter of 2019, a 90 basis point increase over last quarter. Total group revenue pace for the remainder of 2022 is down just 70 basis points compared to the same time in 2019. As we look forward to 2023, we currently have 2.6 million definite group room nights on the books, an increase of 400,000 room nights since last quarter. Total group revenue pace is up 5.8%, driven by rates on the books being up over 6% compared to 2019. We expect the short-term nature of group bookings to continue over the near term and are encouraged by the large base we currently have on the books. Sourav will provide more detail on business mix, markets, and our balance sheet in a few minutes. In addition to delivering 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 managers, gaining market share at hotels through comprehensive renovations, and strategically allocating capital to development ROI projects. We are targeting a range of $147 million to $222 million of incremental stabilized EBITDA on an annual basis from the initiatives and projects underlying our three strategic objectives. We continue to make progress on the Marriott Transformational Capital Program, as we believe these renovations allow us to capture incremental market share. At the JW Marriott, Buckhead, we have seen a RevPAR index share gain of 13.2 points over the trailing 12-month basis compared to its pre-renovation index. Trailing 12-month transient rates are up an 11% over 2019, and banquet revenue per group room night has increased by over 6%. In addition to the positive momentum we are seeing at the JW Marriott, Buckhead, we have seen a RevPAR index share gain of 11.7 points at our New York Marriott Downtown on a trailing 12-month basis compared to its pre-renovation index, and a 7.6 point gain at the Ritz-Carlton Amelia Island, all far exceeding our targeted range of three to five points of RevPAR index gains at renovated assets. 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 comprehensive renovations. This includes the Don CeSar located in St. Pete Beach, Florida. The renovated resort is performing phenomenally for us, with a RevPAR index share gain of 12.8 points over its pre-renovation average. In closing, as macroeconomic concerns continue to play out, we believe our capital allocation efforts over the past few years and our current balance sheet position us very well to navigate any challenges that might lie ahead. We have worked with our managers to redefine the operating model, carefully reinvest in our assets, and maintained a strong investment-grade balance sheet. We will continue to be patient and opportunistic as we position our portfolio for outperformance. With that, I will now turn the call over to Sourav.

Sourav Ghosh, Executive Vice President and Chief Financial Officer

Thank you, Jim. And good morning, everyone. Building on Jim's comments, I will go into detail on our third quarter operations, full-year guidance, and our balance sheet. Starting with topline performance, rates continue to drive the RevPAR upside, especially at our Sunbelt and Hawaii hotels where rates were up more than 25% compared to the third quarter of 2019. Rates at our urban and downtown hotels surpassed 2019 levels for the first time since the onset of the pandemic, with rates 4% above the third quarter of 2019. Turning to business mix, overall transient revenue was up 2% over the third quarter of 2019, driven by 25% rate growth. Holidays throughout the quarter and into October continue to recover from an occupancy perspective, with Columbus Day achieving the highest holiday occupancy post-pandemic. Urban and downtown holiday occupancy growth outpaced Sunbelt and Hawaiian markets, with especially strong demand growth in Chicago, New York, and Washington D.C. Business transient revenue was down 22% compared to the third quarter of 2019, but volume improved by 300 basis points over last quarter, driven by our hotels in New York, Washington D.C., Boston, and Seattle. Business transient rooms sold reached a new quarterly high in the recovery, and August set the new monthly high-water mark with more than 120,000 rooms sold, beating the prior record set in June. In September, the overall business transient rooms sold was slightly ahead of August when comparing to 2019, driven by our urban and downtown hotels. Encouragingly, business transient rates were up 3.1% compared to the third quarter of 2019. Looking specifically at recent business transient trends in urban and downtown markets, rooms sold were just 10% below 2019 in September, driven by San Francisco and Denver which exceeded 2019 levels, while New York was just 3% below 2019. Turning to group, this quarter marks the first time that revenue has surpassed 2019 levels for group business overall. In addition, corporate and association group revenue surpassed 2019 levels, marking a significant milestone for our portfolio in the recovery. In the quarter, total group revenues, including out-of-room spending, were 5% above the third quarter of 2019, driven by a 6% increase in rate. In the quarter, group rooms sold were up 20% over the third quarter of 2019. Group room revenue in Sunbelt and Hawaiian markets was up 13%, driven by rates, and room nights sold were above 2019 levels for the first time post-pandemic. At our newly renovated New York Marriott Marquis, group room nights were up 36% compared to the third quarter of 2019 as group demand returned, and the transformed property is being very well received. From New Year's Eve weekend, our hotels in New York already have 62% occupancy on the books at an average rate of $610, an improvement of 219% compared to 2019. Corporate group revenue exceeded the third quarter of 2019 by 70 basis points, driven by a 9% improvement in rate. Our hotels and resorts in New York, Maui, Orlando, Phoenix, and Washington D.C. contributed to the revenue outperformance. Southeastern group revenue was up 20 basis points compared to the third quarter of 2019, driven by 4% rates growth. San Diego hotels drove most of the improvement, benefiting from eleven citywide conferences. The Chicago hotels also benefited from multiple citywide groups during the third quarter. Wrapping up on group, Social, Military, Educational, Religious, and Fraternal (SMERF) groups revenue was up 14% compared to the third quarter of 2019, driven by a 20% increase in rooms sold at our urban and downtown hotels. Shifting gears to expenses, all-owned hotel expenses were up 1.2% compared to the third quarter of 2019. The slight increase in expenses was driven by higher utilities and property insurance, despite wage and benefit savings, which were down 1.4% compared to the third quarter of 2019. As expected, the staffing lag we faced early in the recovery began to ease in the third quarter, and our managers believe they are near desired staffing levels for current business volumes. Wrapping up on expenses, we continue to expect our annual wage and benefit rate inflation for 2021 to 2022 to be in the 4% to 5% range. Taking our strong topline and expense controls together, our fourth quarter all-owned hotel EBITDA margin came in at 28.7%, which is 250 basis points better than the third quarter of 2019. It's important to note that we received the business interruption proceeds from the Falls Pool Project at the Orlando World Center Marriott in the third quarter, which benefitted our margin by approximately 60 basis points. For the second quarter in a row, margins were higher than 2019 across all operating departments, driven by strong rates and increased out-of-room revenues on the topline combined with expanded efficiencies. In relation to our efforts to redefine the operating model, both wages and benefit expenses and above-property costs remained below 2019 levels. To date, our operators have achieved approximately 70% of the $100 million to $150 million that is expected to come from potential long-term cost savings based on 2019 all-owned hotel revenues. Moving on to our outlook for 2022, we have updated our full-year guidance ranges. Taking into account the impacts of Hurricane Ian, we expect full-year 2022 all-owned RevPAR for our portfolio to be between $193 to $195, or down 3.75% to down 2.75% compared to full-year 2019. This implies that our fourth quarter RevPAR will be slightly above the fourth quarter of 2019. Assuming this RevPAR, this implies an adjusted EBITDA range of $1,470,000,000 to $1,500,000,000 at an all-owned hotel EBITDA margin of 31.6% to 31.9%. It is worth noting that our all-owned hotel metrics do not include the Four Seasons Jackson Hole. For reference, we estimate that Hurricane Ian negatively impacted our full-year RevPAR range by 70 basis points, our TrevPAR range by 80 basis points, our adjusted EBITDA by $20 million, and our all-owned hotel EBITDA margin by 10 basis points. Despite the impacts of the hurricane, the midpoint of our updated full-year guidance ranges are still slightly above our 2019 all-owned hotel results. These estimated ranges are driven by continued rate strength across our portfolio, a strong success season, and a continued recovery in demand. Additional guidance details can be found in the reconciliations of our third quarter 2022 earnings release. Turning to our balance sheet and liquidity position, our weighted average maturity is 4.8 years at a weighted average interest rate of 4.1%, and we have no significant maturities until 2024. As of today's call, we have $2.2 billion in total available liquidity, which includes $187 million of FF&E reserves and full availability of our $1.5 billion credit facility. Adjusting for the Four Seasons Jackson Hole acquisition and using the midpoint of our full-year 2022 EBITDAre guidance of $1,480,000,000, we would expect our year-end 2022 net leverage to be at 2.4 times, unchanged from the third quarter. Wrapping up, in October, we paid a quarterly cash dividend of $0.12 per share. All future dividends are subject to approval by the Company's Board of Directors, though we expect to maintain a quarterly dividend at a sustainable level, taking into consideration potential macroeconomic factors. As we consider future dividends, we intend to revert to a pre-pandemic announcement cadence. As a reminder, our fourth quarter dividend announcement would typically come in mid-December. To conclude, we believe our portfolio, our balance sheet, and our team are well-positioned to continue outperforming, and we will continue to be strategic in the current macroeconomic environment. With that, we would be happy to take your questions. To ensure we have time to address as many questions as possible, please limit yourself to one question.

Operator, Operator

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

Neil Malkin, Analyst

Hi, thank you. Thanks, everyone. Good morning. Jim, my question is related to potential opportunities to put your balance sheet to work over 2023 or the next 12-to-18 months. You cited elevated time-based maturities. Obviously, the brands are reinstating PIPs and a lot of the debt market dislocation, unattractive terms as well. So, it seems like someone in your position with the balance sheet and you guys having the liquidity would be prime to take advantage of potential distress. Can you just talk about how you see that shaping up, and what opportunities could look like next year? Thanks.

Jim Risoleo, President and Chief Executive Officer

Sure, Neil, happy to share a little bit of color with you on how we think the market might evolve going forward. You correctly point out that we are in a unique position given the strength of our balance sheet. Being the only investment-grade lodging REIT and finishing this year, based on our guidance to the midpoint, a 2.4 times leverage puts us in a very unique position. I really believe that the fact that we were an all-cash buyer gave us a competitive advantage in the Four Seasons Jackson Hole acquisition. We were able to move fast, maintain ongoing conversations with owners and others in the industry, and secured that deal with a closing period of less than 30 days from the time that we identified the ROI. So, as we look out into 2023 and '24, there are potentially several different areas where acquisition opportunities may present themselves. The CMBS market for full-service hotel maturities in 2023 is over $7 billion. Similarly, the CMBS market for full-service hotel maturities in 2024 is over $10 billion. What we're seeing already is inbound calls from hotels who have loans coming due over the next year to two years, reaching out directly to see if we might have any interest in buying their property. Because it's going to be very difficult to refinance their loans, plus there could be capital constraints for the assets that have started from a PIP perspective. You’re also correct in saying that the brands are now starting to reinstate PIPs. I think they were very lenient during the pandemic, but now that we are past that period, we are seeing increased pressure in the CMBS market as well as from brand companies and banks. These banks are likely to take a firmer position and not just push things down the road as we enter into '23 and '24. So, we are excited to be positioned where we are. We intend to utilize our balance sheet prudently and we will continue to be very disciplined in our capital allocation decisions. When we underwrite a deal, we do so in a very conservative manner. As I mentioned in my remarks, our seven hotel acquisitions that we completed last year exceeded our pro forma underwriting expectations by 100%. We're excited to carry that momentum forward and look forward to the opportunities that may present themselves.

Operator, Operator

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

Smedes Rose, Analyst

Hi, thanks. Jim, I was wondering if you could just talk a little bit about this Four Seasons acquisition in Jackson Hole on the pricing side. Do you feel like the level at 13.6 times EBITDA is at a discount where it might have been a couple of years ago, or do these kinds of assets just not really see that much fluctuation in pricing in your view? Also, if you could comment on the other 12 or so hotels that were in the strategic portfolio, what's your interest level there?

Jim Risoleo, President and Chief Executive Officer

Sure, Smedes. Let me talk about the process a bit that brought us to the Four Seasons. They brought three hotels to market, and there has been a public announcement regarding the Four Seasons. However, I'm not in a position to really discuss the other assets as we've signed a confidentiality agreement. Suffice to say that we underwrote all three properties that were brought to market, and we simply couldn’t get our arms around pricing for the other two assets, which is why we pursued the Four Seasons Jackson Hole. With respect to the Jackson Hole in particular, this asset typically would trade at a multiple that's 15 times EBITDA or even higher. Its EBITDA is elevated, and it's had a really terrific run during the pandemic. It's been discovered by many, and it's a truly iconic property right at the steps from the gondola at Jackson Hole. The metrics that we purchased it at, 13.6 times at a 6.6 CAP rate on 2022 results, are remarkable. A couple of things are relevant when talking about pricing on this asset. First, I mentioned that the Jackson Hole airport is undergoing a renovation and expansion; it was actually closed for three months this past summer, which impacted demand for the resort. Secondly, the property underwent a complete renovation of guest rooms and bathrooms, which caused significant business disruption. Therefore, we believe that the 2022 performance was muted. As the hotel renovation and expansion wraps up by the end of this year, we feel that the resort can get back to historical levels of occupancy. This property is unique because it is a Four Seasons property but also a ski resort with proximity to Grand Teton and Yellowstone National Parks. We’re very excited to own it and see asset management opportunities to create additional value as we typically do in our underwriting. As for the other 12 properties, it remains to be determined whether or when they bring those assets to market. However, given our balance sheet, our relationships, and our performance on this transaction, we believe we are in a strong position to be a buyer of choice for some of these other properties, which include the Ritz-Carlton Laguna, Ritz-Carlton Half Moon Bay, and several Four Seasons properties.

Smedes Rose, Analyst

Thank you.

Operator, Operator

Thank you. Your next question is coming from Sean Kelly from Bank of America. Your line is live.

Sean Kelly, Analyst

Hi, good morning, everyone. Jim, I am trying to gauge the sequential pattern in the recovery here. We're seeing a bit more bifurcation across the space as we get into the more mature phase of the recovery and the bounce back, incorporating group. As you're going to go over your outlook for the fourth quarter, what's the overall trends we should think about regarding leisure in a group and business travel? Are they a little better for you sequentially in Q4 relative to Q3, and if so, what's driving that? Give us a little color on what you're seeing over the next couple of months.

Jim Risoleo, President and Chief Executive Officer

I'll start off by saying that when you look at our fourth quarter guidance, even when excluding the negative impact of Ian, we have actually raised the guidance RevPAR by 25 basis points and adjusted EBITDA by $7.5 million to the midpoint. So, as we consider our expectations for fourth quarter, we remain optimistic across all segments of demand. From a business travel perspective, there has been sequential improvement month-over-month. Specifically in September, urban and downtown hotels saw business travel down just 10%, which is quite encouraging. As we have shown in our prepared remarks, both San Francisco and Denver were actually above 2019 levels, whereas New York was just 3% below 2019. Overall, these rates are holding strong. The holiday season is looking excellent. Thanksgiving is pacing really well with total revenues projected up 5%, with rates up close to 40%. The same holds true for Christmas, with rates also up 40%. One thing to keep in mind for the group side in Q4 is that the Jewish holidays fell in September in '19, while they were split for 2022—one in September and one in October—which will negatively impact absolute room nights. Additionally, the midterm elections may also impact absolute room nights. Nevertheless, rates are pacing ahead. We picked up a meaningful number of group room nights, booking about 129,000 room nights for Q4, which is 10% above 2019. So all in all, we see a very positive trajectory, which is why we raised our overall guidance, despite the impact of Ian.

Sean Kelly, Analyst

Thank you very much for that. And just as a follow-up, could you provide any thoughts on the magnitude of improvements in large corporate activity relative to small? Are you seeing small and medium enterprises delivering more demand? And how are large corporates behaving on the ground?

Jim Risoleo, President and Chief Executive Officer

Throughout the year, we have been observing an uptick in large corporate groups coming in. We started off with more activity in small to medium-sized groups, but there has been an increase in larger ones. As for the larger associations, they have governing boards determining the cities and hotels for holding their events. Many of those decisions will be made in the next two months, so we expect greater booking activity for those large associations as we enter the first quarter of 2023. Overall, we have indeed seen an uptick in larger groups compared to earlier in the year, which focused more on small, medium-sized groups. Importantly, the rates for next year are also holding strong and are up over 6% with regards to the definite group nights that we have booked so far. In terms of special corporate negotiations, those are still in progress, and we expect to end up in high single digits once it all plays out.

Operator, Operator

Thank you. Your next question is coming from Duane Pfennigwerth from Evercore. Your line is live.

Duane Pfennigwerth, Analyst

Hey, thank you. I'm wondering if you could provide some perspective on how you evaluate capital allocation. What is the process or the metrics you use to balance incremental share repurchases against investing in your existing properties versus opportunistic asset purchases?

Jim Risoleo, President and Chief Executive Officer

Sure, Duane. We are in a unique position to have the balance sheet that allows us to allocate capital in various areas. If we look at a potential acquisition of an asset like the Four Seasons Jackson Hole, it's important to note that properties of that nature do not come to market frequently. I believe that if we hadn't acquired that asset, it would likely have been acquired by someone who would never sell it. Capital allocation decisions are made based on our goal to elevate the EBITDA growth profile of our portfolio while also considering returning capital to shareholders when appropriate. We are committed to being prudent with our capital allocation. For example, we have deployed $1.5 billion of capital into our existing assets, fully repositioning 24 properties, including 16 in the Marriott Transformational Capital Program. Additionally, the performance we've seen from these investments suggests we're on track to outperform the competition. While we won't shy away from share repurchases if we see the right opportunities, we also need to remain patient regarding potential future capital allocations, especially considering the current market dislocation.

Duane Pfennigwerth, Analyst

I appreciate those thoughts, Jim. If I may, could I ask a follow-up regarding Florida? We've seen activity with storm and hurricane threats before. Can you share any updates on holiday bookings or the strength of peak leisure bookings in Florida, excluding the Gulf Coast? Are you seeing any benefits in properties outside southwest Florida from this disruption?

Jim Risoleo, President and Chief Executive Officer

Well, we actually managed to move some business from the Ritz-Carlton in Naples to our Four Seasons Resort Orlando right after the hurricane hit; we successfully relocated a sizable wedding group to that property. The Ritz-Carlton Golf Lodge, which was not affected by Ian, has been operating at capacity. We moved groups that would have been at the beach resort to that location, and it is now performing exceptionally. But let me allow Sourav to provide more insights into holiday bookings, as the demand has remained robust.

Sourav Ghosh, Executive Vice President and Chief Financial Officer

There is definitely compression happening in the overall Florida market, not limited to any specific area within Florida. What’s noteworthy is that room nights have indeed picked up significantly in recent weeks. Interestingly, rates have risen sharply relative to 2019 levels. Our overall portfolio is seeing rates over 40% higher. We are noticing similar trends across the board.

Duane Pfennigwerth, Analyst

Thank you.

Jim Risoleo, President and Chief Executive Officer

Thank you.

Operator, Operator

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

Chris Woronka, Analyst

Hey, guys, good morning. Thanks for all the details so far. We've talked a lot about the impressive run rate growth that we're continuing to see. I haven't heard much about the ancillary pricing on some of the group business, like catering and things like that. Where I'm going with this is to triangulate our expectations for next year. Given the progress made on margins across hotels, do you think margins and pricing on ancillary services are sufficient to offset the impact of increased cleaning and higher occupancy next year?

Sourav Ghosh, Executive Vice President and Chief Financial Officer

Absolutely. Let me start off by saying that the banquet and catering business has been very strong; we were up 6% in 2019 in absolute terms, and on a per-room-night basis, we were up 8.7%. Clearly, the groups coming into our hotels are spending significantly more. Importantly, our food and beverage costs have been better than what we saw in 2019. Our managers, in close coordination with our asset managers, are actively adjusting menu pricing in real-time to address any inflationary pressures. That's how we've successfully driven margin performance across all departments. We feel confident that the measures we've put in place and the long-term initiatives over the last 12 to 18 months are sustainable, and we expect to see margin expansions heading into next year relative to 2019.

Chris Woronka, Analyst

Yes, thanks, Sourav. Just a quick follow-up, if I may. Regarding group revenues, are you primarily referencing pricing increases, or how do you assess the take rate or attachment rates compared to 2019?

Sourav Ghosh, Executive Vice President and Chief Financial Officer

It's both. The take rates are definitely higher. Groups are spending more than before, and pricing has adjusted accordingly. However, it’s not solely about pricing; we are also observing groups requesting more overall. They are opting for premium menu items and higher-tier beverage options.

Chris Woronka, Analyst

Great. Thanks very much.

Operator, Operator

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

Aryeh Klein, Analyst

Thanks. You've made ultra-high-end properties a clear focus, and there are concerns around macroeconomic performance as luxury assets haven't historically fared well during recessions. Is there any nuance within high-end luxury resorts that suggests they behave differently from the rest of luxury?

Jim Risoleo, President and Chief Executive Officer

Luxury resorts have consistently outperformed. Our ultra-luxury resorts have consistently shown better performance than both luxury and other property types over time. For example, from 2014 to 2019, the Four Seasons Resort in Jackson Hole had a 5.8% RevPAR CAGR. The average RevPAR CAGR for ultra-luxury resorts was only 4.3%. Clearly, ultra-luxury outperforms, and this specific asset too has been outperforming the ultra-luxury set itself. As we evaluated our investments over time, we collected data that shows how ultra-luxury performs through different economic cycles, even during downturns or recessions. Another significant point to note is the $1.7 trillion of excess savings remaining in the system, with 80% of that amount held in the upper income brackets. We are not observing any pullback in ultra-luxury performance, and I expect that this will remain strong even if there is any type of economic slowdown. One of the assets we acquired last year, the Four Seasons Resort Orlando at Walt Disney World, we purchased at a 16.8 times EBITDA multiple based on 2019 performance. This property is expected to finish the year at an eight times EBITDA multiple on our purchase price. This further confirms how well ultra-luxury is performing, and it's the same for the Alila Ventana, which is anticipated to conclude the year at eight times EBITDA. We are not seeing any slowdown in booking trends, and there is zero resistance to ADR growth.

Aryeh Klein, Analyst

Thank you. Can you discuss the remaining 30% of redefining the operating model and what that timeline looks like?

Sourav Ghosh, Executive Vice President and Chief Financial Officer

Sure. That process is still evolving. As I've mentioned in previous calls, part of it involves evolving brand standards, and we are continuously working with our managers to identify brand standards that can be eliminated or modified. Some areas take more time than others. Particularly as business returns to normalcy and our properties see more consistent guests, we become able to draw better conclusions on which brand standards make sense. Additionally, we have several proof-of-concept and pilot programs underway in our hotels, focusing on technology that can improve productivity and overall hotel efficiencies, whether through incremental revenue or reduced expenses. This is a matter of testing various technologies and determining what functions best before rolling them out across the entire portfolio. Therefore, you can expect a timeline of around 12 to 18 months for some initiatives, while others may take up to 20 months.

Aryeh Klein, Analyst

Thank you.

Operator, Operator

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

Jay Kornreich, Analyst

Thank you. Good morning. I'm flipping the acquisition conversation. Many companies are looking at their balance sheets and planning defensively due to potential recession risks. Given the current macroeconomic uncertainties, what would prompt you to adopt a more defensive stance to strengthen your balance sheet further?

Jim Risoleo, President and Chief Executive Officer

Let me start by saying, Jay, that as of now, we're not seeing any signs of weakness in any of our segments—leisure, group, and business transient. This holds true not only for the remaining balance of this year but as we look into 2023. Of course, we don't have our budgets set for 2023 and we aren't providing guidance at this point in time, but we feel that we are well-positioned to continue to outperform as we move into 2023. If we were to see business transit slow down, if we began seeing impacts in the job market, or if corporate groups started to cancel or not book, we would indeed become more defensive. However, the current state of our balance sheet is solid, sitting at a 2.4 times leverage ratio, which gives us a strong position. We don't have any major maturities until 2024, and while we face a $400 million bond issue maturing in 2024, being investment grade ensures we can access the debt markets as needed. Almost all our properties are fully unencumbered. Having experienced past slowdowns, we closely monitor demand indicators, and should we see a decline, we will respond accordingly.

Jay Kornreich, Analyst

Thank you for that insight. Regarding potential asset sales, are there any specific assets you'd like to dispose of, or markets where you'd prefer to reduce exposure?

Jim Risoleo, President and Chief Executive Officer

We continuously evaluate actions that can elevate our EBITDA growth profile. The Jackson Hole acquisition gives us a unique opportunity to execute a reverse like-kind exchange if we can compile a portfolio and get a fair price. We are aware that to do this in the current market, seller financing may be required, and we're prepared to do so with the right sponsor and under the right terms. Our past asset disposals have significantly helped elevate the EBITDA growth profile of the company. From 2018 to 2022, we acquired $3.5 billion worth of assets at a 13.7 times EBITDA multiple, whereas we disposed of $4.9 billion at a 17 times EBITDA multiple, which also factored close to a billion dollars of avoided capital expenditures. That also allowed us to dodge significant business disruptions usually related to capital projects. Moving forward, should the right pricing and a suitable sponsor arise, we remain open to transacting additional asset sales over the next six months to a year and a half.

Jay Kornreich, Analyst

Thanks, that's very helpful.

Operator, Operator

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

David Katz, Analyst

Hi, good morning, everyone. Thanks for taking my question. Covered a lot of ground but I wondered if you could circle back and comment on your appetite for urban assets and how you view the performance of various types of cities in contrast to leisure or resort types?

Jim Risoleo, President and Chief Executive Officer

David, it really comes down to pricing and growth. If we believe that we can acquire an urban asset at a favorable price, and it's projected to perform in a manner that will positively impact the EBITDA growth profile of the company after considering capital requirements and renovations, then we won't dismiss any markets outright. We intend to maintain a geographically diverse portfolio and allocate capital to areas where we can generate exceptional returns. Notably, in 2022, we have less than 10% of our total EBITDA coming from any singular market in the country, except for Maui and Oahu, which are the only two markets contributing 12% to our overall EBITDA. The two markets close to 10% each are Orlando and San Diego, which are both excellent markets. When we think about how to allocate capital, a balanced geographical diversification is essential.

David Katz, Analyst

That's very helpful. Thank you.

Operator, Operator

Thank you. To be respectful of other calls, that will be all the time we have for today. I will now hand the conference back to Jim Risoleo for closing remarks. Please go ahead.

Jim Risoleo, President and Chief Executive Officer

I would like to thank everyone for joining us on our call today. We truly appreciate the opportunity to discuss our quarterly results with you. I hope you enjoy the holiday season, and I look forward to seeing many of you in Nareit in a few weeks. Thank you for your continued support.

Operator, Operator

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.