Greetings and welcome to the Pebble Brook Hotel Trust fourth quarter earnings call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Raymond Martz, co-president and chief financial officer. Thank you. You may begin.

Thank you Donna, and good morning everyone. Welcome to our fourth quarter and full year 2024 earnings call. Joining me today is John Bortz, our Chairman and Chief Executive Officer, and Tom Fisher, our Co-President and Chief Investment Officer. but before we begin i'd like to remind everyone that today's comments are effective only for today february 27 2025 and our comments may include forward-looking statements which are subject to risk uncertainties please refer to our sec filings for a thorough discussion of these risk factors and visit our website for detailed reconciliations of any non-gap financial measures discussed during the call we have a lot to cover this morning so let's dive right into our financial results we are pleased to report that our fourth quarter and year-end 2024 results significantly outperformed our outlook driven by strong performance from our resort portfolio and continued momentum and our recently redeveloped properties for the full year same property total rep bar increased 2.1 percent driven by gains across both urban and resort properties along with stronger out-of-room spending. Adjusted EBITDA rose 0.8% to 359.2 million, exceeding the midpoint of our outlook by 11.2 million. Adjusted FFO per diluted share grew 5% to $1.68, surpassing our outlook midpoint by $0.09. Focusing on the fourth quarter, same property total rev par increased 1.8%, propelled by 4% growth at our resorts and 0.7% increases at our urban hotels. These results include a 190 basis point negative impact from two named storms in Florida and the brand conversion and renovation at our Hyatt-centric in Santa Monica. Excluding these disruptions, same property total rep art growth for the fourth quarter would have been closer to 3.7%. Adjusted EBITDA for the quarter reached 62.7 million, exceeding our expectations due to stronger hotel performance, particularly at our California resorts and our recently redeveloped properties. Results also benefited from 5.4 million in business interruption proceeds from the final insurance settlement for Hurricane Ian. These BI proceeds were not assumed in our prior outlook. Portfolio-wide increases in business group, corporate transient, and leisure demand fueled our growth in q4 same property resort occupancy jumped 3.7 percent to 65 percent despite storm-related impacts in Florida weekday occupancy surged 4.4 points reflecting the continued rebound in business group demand while weekend occupancy increased a healthy two points on improving leisure travel our California resorts led the way with occupancy gaining 6.6 percentage points and rampart climbing 8.8 percent. We're very pleased to see that this momentum in both group demand and leisure at our resorts is carrying into 2025. A key driver of this encouraging growth was an almost 15 percent increase in business group demand at our resorts. While business groups often booked at lower ADR than weekend leisure travelers, their total revenue contribution, particularly in food and beverage, which grew 7% in Q4, plays a vital role in driving EBITDA growth. This growing mix of business groups drives increased profitability across our resort portfolio. At our urban properties in Q4, I can see rose 2.9 percentage points to 68.1%, supported by solid group and transient demand growth, plus improving weekend leisure business, similar to what we saw at our resorts. For the full year, resort occupancy gained 2.9 percentage points to 69.9 percent, led by a 4.4 point increase at our California resorts. Our urban occupancy rose 2.6 points to 71.3 percent. Notably San Diego, our second largest market by EBITDA, climbed 6.9 points, while San Francisco and Chicago each improved 2.8 points. Boston, our largest market, gained 2.4 points. Portland also began showing signs of recovery, gaining 1.6 points for the year. Notably, in the second half of the year, our two downtown Portland properties experienced an average occupancy increase of more than nine points. Same property resort revenue grew 4.3 percent in Q4 despite the storm-related disruptions, outpacing the 0.7 percent growth at our urban properties. Urban performance remained constrained by the ongoing headwinds in San Francisco Los Angeles and Portland excluding these three markets same property urban rep are for q4 would have risen 6.9% and same property total revenues would have increased 5.7% for the full year resort total revenues rose 1.2% while urban properties posted a 3.1% gain however adjusting for the challenges in San Francisco LA and Portland same property urban total revenue growth would have been a robust 7.7% underscoring the strength of our portfolio outside these lagging markets looking at the 2025 we believe the normalization of resort rates alerts largely runs course after a 9.3 percent decline in 2023 and a 4.7 percent decline in 2024 resort rates remain 33% above 2019 and we don't expect any further meaningful rate clients out of resorts this year. Same property non-room revenues also remained healthy, increasing 3.4% in Q4 and 3.3% for the full year. Food and beverage revenues alone grew 4.1% in Q4 and 3.5% for the year, reflecting continued strong out-of-room spending by both business and leisure travelers supported by increased business group demand. Our redeveloped properties completed in 2023, including Hilton Gaslamp, Margaritaville Gaslamp, Southernmost Resort, Jekyll Island Club Resort, and Viceroy Santa Monica delivered strong results. Q4 occupancy for these properties rose 4.7 percentage points, RAPAR increased 3.8%, and market share expanded by 274 basis points. For the full year, these properties saw a 10.7 point occupancy gain, an 11.3% RAPAR surge and EBITDA growth of over 20% delivering an impressive 1100 basis point market share gain turning to market segmentation q4 group room nights rose 2.8% while transient room nights grew 5.6% with group representing about 26% of total room revenue group mix rose 60 basis points year-over-year for the full year the 25.6% primarily reflecting stronger business group demand trends at both our resorts and urban properties. Our intense focus on operational efficiencies and cost controls resulted in the same property hotel expense increase before fixed costs of just 3.1 percent in Q4. While same property occupancy increased 4.8 percent, this lowered our cost for our fighting room by 1.7 percent. Same property hotel EBITDA for Q4 was four million dollars below q4 2023 reflecting several one-time costs from the new labor agreements in several urban urban markets along with the impact of florida storms and the hyatt centric brand conversion and renovation excluding these factors hotel evita would have increased year over year for the full year same property expenses before fixed costs grew by just 2.7 and on a per occupied room basis hotel expenses declined by 1.5 percent as a result same property hotel EBITDA exceeded 2023 by three million our relentless focus on operating efficiency was key to mitigating waste pressures and other inflationary cost pressures please note that in 2024 we received about 10 million dollars in real estate tax and municipal tax credits additional real estate tax credits are not assumed in our 2025 outlook creating a roughly 100 basis point headwind to our 2025 expense growth rate. While we remain optimistic about securing additional tax credits through ongoing appeals, the timing remains uncertain and unpredictable. On the capital investment front, we invested $91 million in 2024, marking the completion of our multi-year, $525 million portfolio-wide redevelopment program. Early returns from these recent investments have been extremely encouraging, and John will discuss some of these during his remarks. 2025 our capital investments are projected at 65 to 75 million dollars reflecting our portfolio's excellent condition and reduced need for additional capital we expect a similar capital investment level in 2026 excluding the potential paradise point resort redevelopment and conversion in san diego into a margaritaville resort which remains in the review and approval process with the california coastal commission at la playa beach resort we made tremendous progress in repairing restoring the resort following hurricanes plain and milton the pool complex opened in december and the upper floors of the 79 room beach house opened in mid january the remaining 20 ground floor guest rooms are expected to be substantially completed in q2 2025 pending regulatory approvals and supply chain timelines all repair and restoration costs are covered by insurance net of deductibles it's worth pointing out that we made significant improvements as part of the rebuilding of La Playa following Hurricane Ian to significantly strengthen the property against future storms. In the aftermath of hurricanes Helene and Milton, we experienced reduced downtime, far less damage, and a much more efficient restoration process. Building on this success, we plan to make additional upgrades this year to further fortify La Playa and enhance its resilience against future storms. Looking ahead to 2025, BI proceeds from the recent hurricanes Helene and Milton will be substantially lower than those received for Hurricane Ian, creating a hurt earnings headwind. For context, in 2024, La Playa generated $19 million in hotel EBITDA plus $23.8 million in BI proceeds, totaling $42.8 million in adjusted EBITDA. Our 2025 outlook assumes that La Playa would generate $24 to $26 million in hotel EBITDA below its stabilized $35 million level, plus approximately $6 million in BI proceeds relating to Hurricane Helene and Milton for a total of $30 to $32 million. Moving to our balance sheet, we made significant strides in strengthening our balance sheet and reducing leverage in 2024. We successfully executed $1.6 billion in debt financing and extensions, paid down over $350 million in bank term loans, and extended most of the remaining term loans out to 2029. The next major maturity is our $750 million convertible note, which is not due until December 2026. Our weighted average interest cost on our debt was 4.2% at the end of the year, one of the lowest in our industry, and reflecting our disciplined and opportunistic approach to managing our balance sheet. In addition, we ended 2024 with $217.6 million in cash, and with lower near-term capital investment needs, we expect to generate significant free cash flow this year and next. We are also pleased that the strong operating performance combined with proceeds from the hurricane in settlement and free cash flow helped to reduce our net debt EBITDA to 5.8 times, down from about 6.5 times in 2023. And with that, I'd now like to turn a call to John for a deeper look at our hotel operating results and expectations for 2025.

Thanks, Ray. And thanks to all of you who've joined us today. I'd like to provide additional insight and perspective into last year's performance and our outlook for 2025, both for the lodging industry and for Pebble Brook. As a reminder, at the start of last year, we forecasted industry REF PAR growth at zero to two percent, though many prognosticators were significantly more optimistic. The final result was a modest 1.8% growth with a notable 3.6% surge in Q4. So why did the industry underperform most of the higher forecasts? We believe it primarily had to do with the issue of normalization. Our 2024 forecast stems from our belief that post-pandemic demand behaviors had not yet fully normalized. We expected a prolonged adjustment period, which limited demand growth. Between April 2023 and September 2024, industry demand remained flat, which is unique in history for a period with GDP growth in the mid to upper twos. However, by Q4 2024, we observed more typical demand behavior as evidenced by a 2.2% increase in demand, more in line with GDP growth and historical norms. This trend continued in January 2025, with demand up another 1.7%, reinforcing our view that industry demand is once again more closely tracking economic growth. In 2024, business group and transient travel continued to recover and leisure demand returned to urban centers that are providing safer environments and vibrant cultural sporting and entertainment attractions. By late 2024, we saw early signs of renewed leisure travel growth industry-wide, further supporting our view that consumer travel behaviors have normalized. While some of the Q4 improvement may have been a post-election boost from reduced uncertainty surrounding the election, we believe the primary driver was the renewed link between industry demand and economic growth. For Pebble Brook in 2024, we saw continued recovery at our urban properties with demand growth coming from business group and transient, as well as leisure travelers returning to the cities. However, challenges in three key markets, San Francisco, Los Angeles, and Portland, muted our overall performance. In 2024, San Francisco suffered from a weak convention calendar. Los Angeles grappled with the lingering effects of the 2023 entertainment industry strikes, and Portland struggled with intense quality of life issues and the slow implementation of policies to improve the city, which finally occurred later in the year, offering some optimism for 2025 and beyond. As Ray indicated, our overall performance was enhanced by excellent performance at many of our recently redeveloped and repositioned properties where we've invested over half a billion dollars in recent years. These properties are still ramping up with significant RevPar share gains expected over the next few years, along with non-room revenue growth due to the re-merchandising and amenity additions made at these properties. As detailed in our updated investor presentation, we anticipate continued upside from these strategic investments. Let me provide a few performance examples. Embassy Suites San Diego downtown gained over 330 basis points of REV PAR share since its last stabilized pre-development year in 2018, and all of the gains were in 2024. The Weston-San Diego Gaslamp Quarter has gained 1,570 basis points since its 2019 renovation, including continued improvements in 2024. Both the Embassy Suites and Weston Gaslamp are now considered stabilized following their redevelopments, and we account for them that way within the EBITDA bridge in our investor presentation. One Hotel San Francisco transformed in mid-2022 and has gained over 4,485 basis points of RevPAR share since 2019, its last stabilized year prior to its redevelopment and brand conversion and that includes 970 basis points in 2024. We expect further share gains this year and likely next year as well. Year-over-year in January, the one gained 870 basis points of REVPAR share. Chaminade Resort, which we don't think is stabilized yet, though we conservatively treat it as stabilized in our EBITDA bridge has gained 1,150 basis points of REVPAR share since 2018 including 700 basis points in 2024 as we really get going and driving significantly more group to this unique resort. Harbor Court in San Francisco has gained 900 basis points from its last stabilized year in 2019, all of which was achieved in 2024. Many of our other more recent developments and repositionings have also gained share. For example, Estancia Hotel & Spa in La Jolla is already outperforming its pre-construction 2022 levels by over 350 basis points, despite some disruption from redevelopment in 2024. We're expecting large gains in RevPAR share at Estancia this year, along with significant gains in non-room revenues, as we added multiple outlets, vent lawns, and a completely redeveloped full complex. We continue to be very excited about the major investments we've made over the last few years, covering a large portion of our portfolio, And we're confident in achieving the REVPAR share gains that will drive the conservative EBITDA upside, which is detailed in our investor presentation. Now, looking ahead to 2025, we expect industry hotel demand will revert to its normal historical connection with economic growth. growth. With GDP projected to grow 2 to 2.5 percent, we're forecasting industry demand growth of 1.75 to 2.25 percent and limited supply growth of well under 1 percent. That should lead to an occupancy increase of about 1 to 1.5 percent. We expect industry REVPAR to grow 1% to 3% in 2025 with more ADR growth represented at the higher end of the range and with potential upside in the second half of the year if revenue managers gain more confidence in pricing. Our industry forecast assumes no progress in reducing the current domestic outbound to international inbound imbalance, which currently contrasts with pre-pandemic norms when international inbound was stronger than domestic outbound travel. We should note that we're increasingly cautious about the potential for a negative economic impact from the plethora of domestic policy announcements and threats from the current administration. While we were quite optimistic just a month ago due to the overall optimism expressed by businesses businesses, and much of the public following the election. Some of that enthusiasm seems to be waning as concerns increase about extensive talk of tariffs, government firings, mass deportations, and significant reductions in federal spending, including many spending freezes already put into place. Most of these items are not business friendly. Without these very significant concerns, we would be much more positive and confident in our 2025 outlook. For Pebblebrook, the LA wildfires have created a tough start to 2025. Past disasters like these wildfires often bring longer-term business opportunities for the affected areas. However, they tend to primarily benefit the lower priced hotels and sub-markets. Our West Los Angeles properties, which fall into the upper upscale and luxury categories, have not yet seen increased demand. While other parts of the vast LA market have benefited from evacuees, first responders, and early cleanup efforts, our West LA sub markets which are higher priced have not that said we believe significant new demand will emerge as extensive rebuilding commences over the next few years additional demand drivers for LA include the NBA all-star game and World Cup games in 2026 the Super Bowl in 2027 and of course the long build-up to the 2028 Summer Olympics. The fires caused significant group and transient cancellations and led to a very substantial slowdown in bookings at our properties. While we're seeing some recent recovery and pickup, booking volumes are not yet back to normal at our LA properties. February has been weaker than January, though March is showing improvement. Frustratingly, Despite outreach from the hotel and business communities, local LA leaders, including the mayor, have not publicly encouraged business and leisure travelers to return to LA. The fires affected two major residential neighborhoods, not commercial or tourist areas, and all major attractions remain open and unaffected. All the reasons to go to LA continue to exist and are undamaged. The Sun is out, the air is as clear as it normally is, and the beaches are beautiful. Of course, the silver lining here is that our comps for next year will be much easier. The negative start to 2025 for our LA properties is disappointing, given our expectations that this would be a recovery year for LA following the entertainment strikes and slow return of production last year. We're currently estimating a $9 to $12 million impact to Rooms revenue, with $6.5 to $8.5 million of that occurring in the first quarter. Total revenue is projected to take a $12 to $16 million hit, with $8.5 to $11 million in the first quarter. This translates to a 115 basis point drag on full year REVPAR growth and a 100 basis point impact to total REVPAR. For the first quarter, we estimate a 380 basis point impact on REVPAR and 320 basis points to total REVPAR. As a result of these forecasted revenue declines, we've reduced hotel EBITDA by $9 million for the full year with a $6.5 million impact in the first quarter. Outside of LA, our other markets are well positioned, led by San Francisco and Washington, D.C. San Francisco's convention calendar is up nearly 70% in room nights to last year, with business transient, group, and leisure travel, all continuing to recover. DC has already benefited from the inauguration and will continue to improve from a very active congressional schedule and government transition. We expect our resorts to lead the way in our portfolio's performance in 2025 as group pace at our resorts is well ahead of 2024. For the total portfolio, group room night pace is up 3.8%, group ADR is ahead by 1.8%, and group revenues are beating last year by 5.7%. Transient pace is also ahead, up 8.3% in revenue, and total combined pace is ahead a healthy 6.9% in total revenues on the books and our overall pickup trends are providing further support for our optimism they've improved as booking patterns and timing have finally normalized the total in the quarter for the quarter pickup in our portfolio turned positive in Q4 and excluding LA it was again very positive in January so So if the economy remains resilient and continues on a solid growth path, we should see our nominal pace advantage grow over the course of the year instead of the opposite behavior and result last year. I also want to highlight the great success we've achieved in improving our operating efficiencies throughout our portfolio through a very intense ongoing collaboration with our operators. We continue to find new and more efficient ways to operate our properties, yet we're not sacrificing service levels. Our customer satisfaction scores and rankings increased again in 2024, and they're up significantly compared to pre-pandemic. Our success in increasing productivity and efficiencies has resulted from the full implementation of our best practices, rigorous auditing of those implementations, extensive detailed benchmarking, and better use of technology focused on eliminating waste, overstaffing, and reducing energy and utility consumption. Kind of Pebblebrook's doge, if you will. And those efforts include testing new technologies based on AI, robotics, sensors, and predictive analytics. Curator and its team have been instrumental in helping us analyze and implement these innovations and do it at favorable pricing. We've also intensified efforts to reduce costs such as workers' compensation, general liability, and property and casualty insurance. We're actively mitigating risk and reducing costs through targeted property investments and operational improvements. As a result of all these extensive efforts, total expense growth in 2025 is forecasted at 4.1% at the midpoint of our outlook. However, this figure is inflated by the absence of the $10 million of real estate and municipal tax credits received last year. Adjusted for this, total hotel expenses are forecasted to grow just 3.1% at the midpoint of our outlook. This is despite inflationary pressures on wages and benefits, energy, and property and casualty insurance, as well as the increased costs typically associated with higher occupancy and expanded food and beverage operations and volumes. We're extremely proud of our team's efforts to drive efficiencies and reduce costs in 2024. With a continued relentless focus on streamlining operations, we're confident in achieving further improvements in 2025. In addition, our disciplined approach to managing our balance sheet and maturities ensures that we remain well-positioned to deliver strong returns for our shareholders while maintaining one of the lowest overall costs of total debt capital in the lodging REIT sector. As reflected in our song selection today, we have faced many challenges from Mother Earth, but we're adapting and improving, and we believe we're in a good place for 2025 despite these impacts. We're looking forward to a great year this year and in the years ahead when we expect to gain the full benefit of a very favorable environment, including a growing economy, reconnected demand growth, and little to no supply growth in our markets, as well as substantial organic growth driven by the hundreds of millions of dollars we've thoughtfully invested into our portfolio. investments which are poised to generate significant further upside this year and at least through 2027. So that concludes our remarks today, and we'd be very happy to take your questions. So Donna, you may proceed with the Q&A.

Thank you. The floor is now open for questions. If you would like to ask a question, please press star 1 on your telephone keypad at this time. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. We do ask that you please limit yourself to one question. Again, that's star one to register a question at this time. Today's first question is coming from Dory Keston of Wells Fargo. Please go ahead.

Thanks, good morning, guys. Can you dig into your expectations for the outsized out-of-room spend growth in 25 and just what your managers are seeing in discussions with groups on their anticipated spend, and then just differences that you'd expect generally for transient spend at your urban versus resort properties.

Sure. I mean, of course, when you look at our total RevPAR growth outlook, it's higher than our RevPAR growth outlook. So we do continue to expect that out-of-room spend will increase at a rate that's greater than our REVPAR growth rate. That's really in all areas of non-room revenues. It includes food and beverage. It includes parking. It includes resort and other guest amenity fees at our properties. it's in other areas like spa it's at our club in in La Playa where spend continues to go up on a per member and a per guest perspective so I mean what we're hearing from clients is primarily positive they they continue to spend more now sometimes they they book at a lower number but when they come in they spend more and i think that's just a cautious approach from a contractual perspective but but in general we're seeing a very healthy out of room spend and we're seeing those trends

continue okay thank you thank you the next question is coming from duane finningworth of evercore isi please go ahead hey good morning thanks um i wondered if we could zoom in a little bit on the D.C. market.

Obviously, you have some assets there, but you're also in the market, have been in the market for a long time. We've just been getting more questions on government exposure. And of course, D.C. is only a part of that exposure potentially. Can you speak to just generally demand drivers around a change of administration and what the overall vibe is right now?

Well, a lot of us know a lot of people who work for the government here, and I'd say that the general emotional mode is very high anxiety. I think of kind of like a Mel Brooks movie. People are very nervous. People are getting all sorts of confusing communications. People are getting fired. They're getting rehired back. They're getting fired again. It's all over the board. So I think from a mood perspective, that explains the general mood. Now, mood and perception are often different than reality. So there's a number of very positive things happening in D.C. related to demand drivers for hotels. The first is we had an inauguration. I'm sure it was the largest one we ever had, and as a result of that, the results were very favorable and certainly added to the outlook for our first quarter. Changing government always helps, particularly when there's a congressional change because it means the flipping of the committees like in the Senate. And so associations, companies, businesses, you know, they come to Washington, they stay here, they meet with their representatives, the new committee heads, the people who are legislating and leading the legislative effort. They meet with people in the different cabinet departments and so it gets very very active and in a year that is first year after elections it tends to be the most active because it's when the most legislating goes on in that first year when there's sort of that election mandate if you will the additional thing that's happening in the market is that folks have been for the most part ordered to come back to the office and work and that's very favorable for both the downtown in terms of activity levels it's very good for for the restaurants it's terrific for service providers and it's good for the hotels because it means more meetings downtown with people who are actually working again in their offices so DC right now we've forecasted as along with San Francisco as our two top urban markets for the year, and we do expect, you know, that to play out that well, that way. I mean, I've been in D.C. since 1986, not always in the hotel business, but in the real estate business, and we've gone through periods where government has shrunk, and the city continues to grow, and so a lot of people go from the public sector to the private sector. Which is often very healthy for economic growth and I guess the one other thing to mention that that does go along with a change in administration Is that a lot of people move to Washington to work in the new administration and they have visitors and and Sometimes they're staying in hotels because they're commuting back and forth etc. So a lot of positive demand drivers the one negative I would mention is you know freezes in government spending or or, you know, typically don't help when it comes to government meetings. And so we have seen through the portfolio, not necessarily in DC at this point, but elsewhere, where there are meetings related to government.

I know one DEI meeting as an example that got canceled, but there's a little of that that that we should expect because when government freezes happen they can't move forward with with new contracts just provide some context about the amount of government demand we have at our DC hotels it's only about a mid single digits kind of an area that's direct government business they may be indirect some people coming in to see the government so that could be larger clearly DC is the base for the federal government but when it comes to also spending reductions you know federal government is in every state so this is not something that's just isolated to washington dc although it's probably larger impact but it is in every kind of market so it is a broader thing and we're we're all waiting to see how this plays out thanks dwayne thank you the next question is coming from jay cornreich of wedbush securities please go ahead hi good morning thanks you mentioned in your comments that you anticipate a no further material leisure rate deceleration in 2025.

So I was just wondering if you can expand on that comment. What do you see that gives you more confidence on the leisure side? And is there any possibility for leisure rate to even be up by the end of the year?

Yeah, I mean, through our 13 properties, we have some that will be up this year. We have some that will probably be down a little bit this year. and we have others in this sort of flat, you know, up a little, down a little territory. So I think right now our expectation is, you know, we gain meaningful occupancy in our resorts this year and flat to maybe a little bit of growth in rate, depending upon how the year plays out, particularly the second half of the year. I mean, what gives us confidence is what's on the books and how that looks from a rate perspective. It's encouraging the resorts that have been redeveloped, which are many of them, are charging more. They're growing group rates at the same time that they're attracting more leisure to the properties because we've added a lot of amenities. So the biggest confidence that we get is from what business is on the books and what rates we're picking up at within the portfolio.

Okay, I appreciate that. And then just one other, you know, looking further into Los Angeles and the impact that's happening in the portfolio, which you outlined in guidance, Do you feel like that's, you know, properly de-risked or is there any further impact that that could have? And, you know, on the vice versa side of that, as the year progresses and maybe transient demand comes back in with still some relief customers, is there opportunity for, you know, upsets in that market?

Yeah, so I'd start out by telling you we don't have experience with the impact of fires on a medium to long-term basis. I don't know many people who do in terms of hitting major metropolitan areas. I think Hawaii is the closest thing we can come to, and there were a lot of governmental mandates that occurred in Hawaii because of the loss of housing and jobs on such a small island that really stretched it out. I think our best guess, Jay, which is what we put together, and I would tell you, it's not conservative. It's not aggressive. It's really our honest, John, best guess at how we think the impact's going to wind down over the first half of the year. We've not forecasted anything for the second half. There certainly could be an impact. again it's unknowable and unpredictable at this point we think it'll be less the current trends continue to be positive our operators have gone out and and made a lot of outreach to their regular customers and there are a lot of those in the LA markets in the recording industry in the entertainment industry in the fashion industry, in the financial industry, in the tech industry, and, you know, the feedback that we've gotten is people stopped travel into the market when the fires began in that first week, and some have returned to normal. Some are in the process of setting a date, whether it's sometime in March, in some cases in April, for their return of regular travel. And that's for both group and leisure. I mean, originally we saw a recording in the music industry that was put on hold. We saw hesitancy around some of the awards shows. We saw, you know, this sort of continuing safety approach based upon kind of the dramatization of this view that maybe the fires were still happening, that it impacted half of L.A., that the smoke was terrible, that there was things in the air that you didn't want to breathe. And frankly, that went away after the first couple of weeks. So folks have been very hesitant in returning their travel. But saying that, in the last two weeks, we've seen a significant pickup in normal travel, which is very encouraging. And to the second part of your question, Jay, I think there will be lots of vendors, service providers, government that will be coming to the market for the cleanup and the rebuilding efforts. Again, most of them are going to stay outside of our markets because our markets are higher priced. I mean we don't take a lot of per diem business typically because it's much lower than our average rates and but if but it should create significant compression in the market at some point when that activity level really begins to become substantial so and and as it relates to certainly the people who live in the Palisades anecdotally, and I know quite a few of them, they've already rented apartments or condos or they've gone to live in their second homes. Those in Altadena, I think, are probably struggling more and are utilizing the hotel stock, particularly at the mid to lower end.

So, and I think that will go on for a while until there's alternative affordable housing for for folks from that neighborhood is that helpful yeah very helpful thanks thanks for all the color sure thank you the next question is coming from michael belisario of baird please go ahead good morning everyone john just first question for just some of the expense cuts and efficiencies is there maybe a dollar amount for 24 that you think you achieved and then uh could you provide us with some more sort of on property examples of things you've done or plan to do in 25. um there is no there

is no dollar amount uh the the target is is continuous and relentless um efficiency efforts there's a lot of opportunity within the portfolio on the food and beverage side to make that more efficient there are lots of opportunities on the insurance side which will be a multi-year effort related to improvements we're making at the properties to reduce guests and and associate injuries and and reduce the impact of those, speed the return of people back to work to minimize and mitigate losses. We're using some predictive technologies that will improve and shrink the number of water main breaks and pipe breaks that occur in our hotels, technologies that monitor, I don't I don't understand it. I guess it has to do with the vibrations or something that occur as a pipe weakens over time because those pipe breaks tend to be, you know, significant impact when they happen. It's cross-training, Mike, in the portfolio. It's testing more technologies. We are utilizing more remote and mobile check-in. we think that will continue to lead to further reductions in overall staffing levels part of it is just being efficient using appropriate labor management technology that exists but it's you know if you put garbage in you get garbage out so making sure everyone in the properties who use it who need to use it, are well-trained in it, understand what information they need to put in in order to get the most efficient result. And so when we talk about best practices, it's a lot of things like that. There's also a lot of investments we're making with an effort to reduce utility consumption, whether it's electricity, natural gas, water. we have some very significant improvements going on to make toilets toilets more efficient to reduce I guess the ongoing leaks that occur in toilets of them being constantly refilled it's it's lots of little things but but they all add up to very substantial numbers and Ray maybe there's a couple that you Yeah, look, as John indicated, there's many things.

It's not just one or two things, but I think what's great, I think our hotel teams and our asset managers know with the expenses that have increased the last several years, we all have to operate differently. And fortunately, we have really good hotel teams that are open and receptive to how to operate differently in rethinking all that. And that allows, you know, more efficiencies, different staffing plans, different use of labor and technology that really, frankly, wasn't available, you know, four or five years ago. So we're really encouraged. We don't want to share all of our secret sauce here because that's what I think we can do a little differently. and also and we alluded to this in the script the curator the curator program is really helpful to us because they can do a lot of this R&D and research they found plenty of programs that don't work and you kick those out but they find ones that do work so that allows us with our asset managers focus on the properties we have another team that's focused on these areas so we feel really good about it and we can expect to have more savings and efficiencies in 25 and beyond and I think one of the things that's helpful for us is with 12 or 13 different operators.

We see 12 or 13 different operating models and different ways our operators approach everything. And part of what we've created with Curator is we have a very extensive, very detailed benchmarking system. And so our asset managers are pulling every month, benchmarking against different sets of properties that are relevant, looking all the way down to every single line item within every major category of expense and trying to understand if one property is doing it less expensively is there something there that can be learned and rolled out through the rest of the portfolio and that has been extremely helpful this past year in terms of a A lot of the staffing models that our different operators use in our portfolio in order to create increased productivity.

Understood. That's helpful. And then just follow up for me on an unrelated topic, but on the disposition front, what's the latest and greatest there in terms of your efforts to transact and maybe get some things across the finish line in 2025? and I ask that in the context of your short-term incentives for 25, that dispositions are at the top of the list. Thanks.

Yeah, Mike, this is Tom. Good morning. Listen, we're going to continue to be opportunistic, and if it makes sense, I mean, obviously the transaction market, you know, has kind of the same continuation from late 23 into 24 in terms of, I think, high investor engagement and interest, but little conviction. I think that's shifting. You've got some ingredients that make make it a little more functioning. I mean, you have more debt availability. I think debt's found its footing certainly with more players, more availability, you know, better pricing. We've seen a compression and spreads over the last year. And so I think investors can underwrite debt with some confidence. And I think as you've kind of heard today, you know, the operating fundamentals are more predictable and people can, I think, underwrite as well. That typically leads to higher investor conviction. And I think if we get this trend of the reconnection of, you know, industry demand with GDP, you know, certainly over the fourth quarter last year and into the first quarter this year, I think people are going to take notice of that and become more active and more bullish. The question is going to be to the other point is, you know, maybe some of the uncertainty around some of the administration policies, is that going to slow things down for another 30, 60, or 90 days? So, listen, we're going to continue to be active, continue to have a number of discussions, and when we have something to announce, we'll certainly announce it.

Understood. Thank you. Thanks, Mike.

Thank you. The next question is coming from Gregory Miller of Truist Securities. Please go ahead.

Thank you. Good morning. I'd like to ask about San Francisco. Certainly, there have been many developments in recent months, including changes to local leadership. Could you provide your latest views on the market beyond convention citywide, perhaps if you can speak to what you're seeing in the streetscape, changes implemented by the new mayor or the board of supervisors, tourism promotional efforts, or other factors that are top of mind for you? Thanks.

Sure. So I'd say pretty much in all regards, things are improving in San Francisco from a quality of life perspective, from a policy perspective, from an optimism perspective. I think there's a lot of momentum now. I think we'll look back and say 2023 was, you know, the trough in maybe for the city, although I could argue that the trough from a quality of life perspective was probably 21 or 22, but because I think things have gotten, had already gotten significantly better in the market. The city's in the process of rebuilding the police force, The Board of Supervisors is much more moderate than it was prior to the last two elections. We have arguably a more moderate mayor. Mayor Breed came around and was pretty moderate. We have a business-friendly mayor. We had our first business tax reduction, I think somebody told me, in 80 years in San Francisco that passed in the last election so and if you look at some of the other categories we've started to see office positive office absorption in the market there's there's been a break in office values and they've started to trade albeit very opportunistically for the buyer community from a pricing perspective we're seeing all segments of demand increase there are many many back to the office mandates that have been implemented and and noticed on the ground both from a food service center and other service participants in the marketplace we've seen it at our hotels in terms of increased in-house group demand the sporting activities and music activities are active in the market and we're getting the benefit of that on weekends the city I mean again outside of one district for which there's no reason to go into it the city looks clean you don't see any more homeless there and then you do in most any other city today. They're working hard on providing services to those folks in need so that they don't need to live on the street. So I think we're very, very positive. It will be one of our two best urban markets this year along with DC, and we expect it to be in the mid to high single digits in terms of Rev Park Road this year. So we think the city's turned. There's a new leader of SF Travel. We've spent significant time with her. We're very high on her. She's already made a difference. San Francisco's attracting conventions again, new conventions. Microsoft Ignite is coming the week before Thanksgiving. That was a huge conference in Chicago last year in the latter part of the year. They've attracted fancy foods back from Las Vegas. They attracted snowflake back from Las Vegas. And there's other new bookings and some return bookings for future years. And when you look at the convention pace, and I know you said outside of the convention, but I don't want to exclude the future beyond 25. You know, the pace right now has significantly increased over the last six months for out years, including 26, 27, and 28.

So we think the convention room night demand is going to continue to go up in each subsequent year based upon where they are from a pace perspective. and Greg just to support our confidence is supported by the the numbers in our San Francisco hotel is the pace each quarter room nights are up double digits each quarter versus last year that doesn't mean we're going to end up double digits up but it is supportive of a strong convention calendar or return to office by a lot of companies in San Francisco AI which we know San Francisco is the center of what's going on in AI right now swap positive momentum which supports our competence. And that's group and transient.

It's not just group.

I appreciate the thorough response from you both. Thanks. Sure. Thanks, Greg.

Thank you. The next question is coming from Ari Klein of BMO Capital Markets. Please go ahead.

Thanks, Ben. And good morning. Maybe just going back to the L.A. market, if you, you know, even before the wildfires, 2024 was a very challenging year. And I think EBITDA in 2024 is 55% below the 2016 peak. I guess I'm just curious, you know, what's your long-term view on that market and how comfortable are you with your overall exposure there? Thanks.

Sure. So I think, you know, LA's, what, the second largest city in America. It has a huge and expansive industry base. it has great weather it has great amenities I mean LA literally sits on the beach practically I think we're we continue to be big believers in the city like San Francisco a couple years ago LA has some challenges some some are our self-inflicted. Others are from a very aggressive labor movement in the city. And LA is one of the later policy, it's moving slower in transitioning to a more moderate policy perspective than San Francisco has and so it'll it's going to take some time for the policies to change but there's a incredible base of business that is serviced in LA people are still moving to LA despite what you might otherwise hear and you've got some really big events coming over the next three years that'll be extremely helpful on top of the significant additional demand that's going to come from as a result of of the cleanup and rebuilding efforts for these two major neighborhoods in LA so it's not without its challenges there's there's little to no new construction in the market there won't be any for quite some time the economics just aren't supportable and that that'll pave the way for you know a substantial recovery from as you describe it a pretty big hole in terms of pullback from where it was in 19 and in fact further from where peaked in 2016 so I'd say the industry is not healthy today from from a business model perspective, but there's opportunity, but we also need some better business policies in the market.

When you compare maybe San Francisco and LA, which of those two markets do you feel better about, I guess, over the medium term?

Because it sounds like there's a lot of maybe more near-term optimism on San Francisco and Yeah, I mean, I think it's maybe a little bit more predictable in San Francisco. right now although if you asked anybody you know six months ago nobody would have said that so so it's it's a fairly small amount of time you know we truck we trough from a convention calendar last year and it had a big negative impact on the market I mean the hole is deeper in San Francisco compared to historical performance than it is in Los Angeles and and so I don't want to pick one, I think we're comfortable owning in both markets. I think if we were a buyer, which we're not today because we can buy our existing portfolio back at such a big discount, but if we were allocating capital outside of our company, we'd be a buyer in these two markets because the values at this point are low, as indicated by the values on a per key basis included in our NAV analysis. And if you compare that to the historical NAVs, you're going to see that both of those markets have been written down very significantly to today's values.

Thanks, Ari. Donna, maybe the next question.

Sure. The next question is coming from Flores Van Dykem of Compass Point. Please go ahead.

Good morning, guys.

My question to you, obviously, you had another gut punch here in L.A. with the fires. You put out a bridge that basically tells you that you think you're going to get to $442 million of EBITDA. of EBITDA. And if I look at your 2019, which is, by the way, that bridge implies 19% growth. If I look at your 2019 EBITDA, you had 436 million of hotel EBITDA. You're still 65. What's the conditions that you need, obviously, outside of the one-off events like the hurricanes in Florida and the fire in L.A. that you think you would need to get to those levels? And how quickly can you get there? And is there a scenario where we can get beyond that EBITDA that you've laid out in your bridge?

Sure. So, Flores, I think, you know, the base need is for continued economic, consistent economic growth. I think if we live in an economy with a couple of percent plus of GDP growth, we're going to see somewhere close to that in demand growth. We've got probably four or five more years in our markets at a minimum where there will be little to no supply growth. And so we'll see occupancy rise and we're going to see rates rise. And that can happen very quickly. They can accelerate very, very quickly as demand grows and revenue managers and owners and operators become much more confident in the demand environment. So when you don't have to fight your neighbor to grow, you can price accordingly. And so if you look at history, I mean, we could be in mid to upper single digits of overall REVPAR growth by next year, and certainly that could increase into the high single digits out into 27 and 28. So in our view, it's not a matter of if, it is a matter of when, but when does matter because expenses keep growing every year. So we've got to grow revenues faster, and then there's a huge amount of operating leverage in the business. And in our case, we have, you know, for us a meaningful amount of financial leverage as well, which will flow through. So we feel pretty good about achieving those numbers over the next, you know, three years or so. And it's really based upon a need for a continued economic growth environment.

Thanks, John.

Thank you. Our final question today is going to be coming from Chris Darling of Green Street. please go ahead.

Hey, thanks. Good morning. John, to the extent you're successful in closing any dispositions this year, how are you thinking about use of proceeds, especially with the convertible note maturity date approaching in the next couple of years? And then secondly, is there a scenario here where maybe you look to sell assets in some of your stronger urban markets, potentially even some of your resort hotels?

I'd imagine the liquidity profile there is you know much superior relative to some of your you know west coast markets yeah so we're going to flip your multi uh question around the room but i'll i'll start and and as it relates to what will we do with the capital um you know we'll decide at the time based upon what the world looks like but if it looks like today which is the most uh confidence we have from a visibility perspective. We use a significant amount of that capital to buy our stock back. It's trading at a more than 50% discount to the midpoint of our NAV range. We would expect to be selling our individual assets within their NAV ranges, respectfully, and that is our historical performance. It's what we've achieved in the past. And then we'll use the rest to pay down debt that relates to the loss of that EBITDA.

And so we want to make sure we remain at least leverage neutral and potentially slightly continue to improve the leverage profile and Chris as relates to the convert so we we provided an updated slide in our new investor presentation on the balance sheet just provide a little more color into some ways what we're thinking about addressing that so look in addition to potential dispositions and the proceeds from that we have right now just as a reminder over 200 million dollars of cash but our free cash flow this is after real capex not a not a cad number we should be averaging well over a million hundred hundred million dollars a year the next few years so depending on how we use for stock buybacks and those sort of things you know you're looking at 400 million dollars plus or minus of available cash so that really brings the potential refinancing of the convert down to that you know 350 400 million dollar range which we can look at a convert we can look at term loans we look at high yield which we're we're in the markets we have a lot of options at our disposal and we're gonna look at what's best at the time what's hardest for us right now is the convert is a really really good coupon right now 175 it's hard to be that anywhere so we like to hold on and take the advantage of that it's gonna show up to our cash flow but it's not something that we are overly concerned about again you've seen the

the improvements in the portfolio last couple years how much leverage has come down in our access to other sources of debt so it's not something that we think is a huge concern that you should be worried about but at least we provide all the options and some good road map there in our investor deck and Ray didn't mention we have a 650 million dollar unused line yeah oh by the way oh by the way so look there's a lot a lot of options there we plan these things well in advance as shown over our 15-year history here at Pebblebrook, and we've never put ourselves in the box, and that won't happen here either.

All very helpful thoughts. I guess just to follow up on the last part of my admittedly multi-part question, but any thoughts on potentially selling in some of those markets where maybe the liquidity profile is a little bit more conducive to effectuating some sales?

Yeah, we continue to discuss internally, you know, what makes sense within our portfolio and what that would mean in terms of the remaining portfolio. I think one of the challenges that we have just as it relates to resorts in general is we've invested a lot of capital in those resorts, and a number of the resorts are not yet stabilized, which makes it a little harder.

We'd like to achieve those returns, and we think, you know, the value might be greater yesterday but if someone's willing to think about that and pay us today that's something we can evaluate understood um appreciate the time thank you thank you chris thank you at this time i'd like to turn the floor back over to mr boards for closing comments hey thanks everybody for participating um we'll see many of you down uh at the at the conference conferences down in orlando and in Hollywood, Florida, and we look forward to updating you on our progress this year, what, in another 60 days. So thanks again.

Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.