Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Sunstone Hotel Investors' First Quarter Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. I would like to remind everyone that this conference is being recorded today, May 5, 2026, at 11 a.m. Eastern Time. I will now turn the presentation over to Mr. Aaron Reyes, Chief Financial Officer. Please go ahead, sir.

Thank you, Operator. Before we begin, I would like to remind everyone that this call contains forward-looking statements that are subject to risks and uncertainties, including those described in our filings with the SEC, which could cause actual results to differ materially from those projected. We caution you to consider these factors in evaluating our forward-looking statements. We also note that the commentary on this call will contain non-GAAP financial information, including Adjusted EBIT.RE, Adjusted FFO, and Hotel Adjusted EBIT.RE. We are providing this information as a supplement to information prepared in accordance with generally accepted accounting. Additional details on our quarterly results have been provided in our earnings release and supplemental, which are available in the Investor Relations section of our website. with us on the call today are brian julia chief executive officer and robert springer president and chief investment officer after our remarks the team will be available to answer your questions with that i would like to turn the call over to brian please go ahead thank you aaron and good morning everyone we were pleased with our performance in the first quarter which came in ahead of our expectations even with some weather related headwinds

across a handful of our markets. The strength was broad-based with continued solid group results and transient performance that was better than anticipated. Overall, RevPAR in the quarter grew an impressive 14.6 percent. Excluding Onda's Miami Beach, which continues to ramp nicely, REVPAR grew 5.7%. This strong revenue performance, combined with continued focus on cost controls at the hotels and at the corporate level, allowed us to generate meaningful growth in earnings. The added benefit of our accretive repurchase activity drove even greater growth in earnings per share, with first quarter adjusted FFO nearly 29% higher than last year. Our resorts once again led the portfolio with combined comparable red part growth of over 18%. While the rebound at Waialeah Beach Resort was expected, it has been impressive where revenue grew 14% in the quarter, even with significant cancellations from the two weather events that impacted the Hawaiian Islands in March. While we will need to navigate some repair work and disruption following the storms, the outperformance in January and February and the trends that we are seeing for the remainder of the year continue to point to a sustained recovery in Maui. We were also quite pleased with performance at our wine country resorts, which turned in a combined 34% growth in REVPAR driven by better contributions from both group and transient business. As we shared with you on our last call, we were encouraged with how Onda's Miami Beach performed over the festive period and into the early weeks of this year. That trend has continued, with results exceeding expectations in the first quarter. We are seeing further strength into April, with second quarter benefiting from strong transient and group business, with major events like the F1 race last weekend and the World Cup coming this summer. During the first quarter, the ONDAHs ran 86% occupancy at a $564 rate and produced $6.5 million of EBITDA. The comp set ran a similar occupancy, but at a rate over $900 per night. Q1 was an absolute success for the ONDAWS, and we are encouraged with how much opportunity we have to continue to grow rate closer to its peers and build on our multi-year growth story. We've had a solid start to the year, and we are well positioned to deliver on our earnings expectations in 2026, and we look forward to the resort's next phase of growth into 2027 and beyond. Our urban hotels had a noisier quarter as we navigated a challenging Super Bowl comp in New Orleans and weather-related headwinds across the East Coast. Rev Par declined 9.3% in the first quarter across our urban portfolio, but out-of-room spend performed better and limited the decline in total REVPAR to only 2.9%. At JW New Orleans, revenue was lower given the benefit of the Super Bowl in the prior year, but despite the challenging comp, our hotel continued to gain share. After picking up nearly 15 points of REVPAR index in 2025, the JW again outperformed the comp set in the first quarter and now sits at over 150% relative to the group, demonstrating the strength of the hotel's location, superior room product, and recently upgraded meeting space. In addition, our New Orleans hotel had one of its best first quarter production results in years with group bookings growing over 50% relative to the prior year. In Boston, the quarterly performance was hampered by the severe winter weather that disrupted travel earlier in the year. Overall, we expect the first quarter to be the toughest quarter for our urban portfolio, with sequential growth in REVPAR through the balance of the year. Our convention hotels turned in better-than-expected performance with REVPAR growth of 5.2%. Performance varied widely, however, as we experienced the push and pull of a few large events. In Washington, D.C., we had a very challenging comp given the inauguration last year. After increasing over 24% in the first quarter of 2025, RevPAR at our Westin, D.C. downtown was 9.8% lower this year due to the tough comp and higher group attrition from the severe winter storms that occurred in the quarter. Despite this decline, our performance was better than expected as stronger transient demand helped to partially offset the sluggish group backdrop in the market. Additionally, the Westin had a solid booking quarter with transient pace for the next six months up 11% relative to last year, pointing to a continuation of the current transient trend. On the flip side, RevPAR increased over 27% in San Francisco, where the Super Bowl added compression to a market that was already on a positive trajectory. In fact, if you look only at January and March, RevPAR was still higher by 14% as the city benefited from an active event calendar and an increased level of commercial activity in the downtown area. Performance at the Renaissance Orlando at SeaWorld was impacted by isolated group cancellations earlier in the quarter and a shift in the mix of business, which led to a decline in rooms REVPAR, but generally flat total REVPAR given the benefit of strong contribution from out-of-room spend. We expect the balance of the year to be more conducive to growth in Orlando, with particular strength in Q3 and Q4, where second-half group pace is up over 40% relative to last year. Lastly, in San Diego, we were pleased to see better transient performance in the market, which has given us a more optimistic outlook for the year. We are in the final stages of our meeting space renovation at the hotel, and we expect that our second quarter will be the toughest comp of the year with sequential improvement through the third and fourth quarters as we benefit from better group patterns and our new meeting space. On the expense side, we were particularly pleased to see better productivity in the rooms department, which allowed us to keep comparable departmental expense growth on a per-occupied room basis to only 1%. This better cost performance was partially offset by higher utility expenses, property G&A, and sales costs. Overall, our comparable portfolio, excluding ONDAHs, saw expense growth for all costs increase 3.4% on an absolute basis during the quarter, or 2.4% per occupied room. This was generally consistent with our expectations and allowed us to grow margins by 140 basis points. Given the cadence of our quarterly revenue growth, we expect that the first quarter will be our strongest margin growth performance of the year, but we are continuing to work with our operators to focus on cost controls and drive efficiencies wherever possible. As part of our last earnings call in February, we noted that we were encouraged by the trends we were seeing in recent operations, but that broader uncertainty gave us reasons to be cautious this remains the case today with recent events only reinforcing this view we continue to monitor events that could impact costs and the demand for travel while we did not see any measurable impact on our first quarter operations an elongated period of heightened volatility or sustained increases in fuel prices could present headwinds. That said, performance in the first quarter was meaningfully ahead of our expectations and based on what we see today, we are comfortable revising our full-year outlook higher to reflect these results. Given the elevated uncertainty, we will continue to be measured in our expectations for the rest of the year. If more of the momentum from the first quarter carries into the balance of the year, or if some of the special events slated for later this year outperform our modest expectations, then we could be positioned to deliver stronger performance. We are encouraged by the increase in hotel transaction activity and believe the environment may be becoming more conducive to executing our capital recycling strategy and demonstrating the value of our portfolio. In the interim, we continue to deliver value to shareholders through an additional $50 million of accretive common and preferred stock repurchase activity so far this year. We expect to continue opportunistic repurchase activity as pricing allows while we focus on generating profitability growth from our operations and realizing the benefits of our investment projects. And with that, I'll turn the call over to Robert to give some additional details on our capital investment activity.

Thanks, Brian. We've gotten off to a start on the operations and investment front. As we shared with you last quarter, our planned capital projects for 2026 were concentrated in the first half of the year, and I'm pleased to report that we have made solid progress executing them on schedule and on budget in san diego we are wrapping up the renovation of the meeting space the finished product looks great and should help the hotel to maintain its leadership position in the market recent trends in the city have been more encouraging and based on what we see today we expect better performance in the latter part of this year and the hotel is pacing ahead for 2027. in miami we are also finishing construction on bazaar and we are very pleased with how the space is coming together we expect to begin training activities in late summer with the restaurant opening in early fall to take advantage of the full high season in the market as we shared earlier our renovated resort is already attracting some great group business, but the addition of Bazaar will round out the property, further increasing its appeal with luxury travelers and higher-end groups. We anticipate that Bazaar will not only help drive incremental room night demand at the hotel, but will be a dining destination for guests from nearby properties and local residents as well. Elsewhere across the portfolio, we will be starting some facade work and a rooms refresh at Ocean's Edge Resort and Marina in the middle part of the year as part of a broader effort we are working on to drive incremental revenue and earnings to this resort. We will also be completing some smaller routine projects across the rest of the portfolio. As Brian noted earlier, our Wailea Beach Resort was impacted by a series of severe storms that came through the Hawaiian Islands in March and brought heavy winds and substantial rainfall. While our resort remained operational during the storms we did sustain wind and water damage in some of the guest rooms public spaces and portions of the roofs we are currently working to restore impacted areas and should have most of the public space and guest room related work completed in the coming weeks we will however have some additional repair work to do on a few roofs which will not be done until later this year. We are working closely with our insurers to pursue cost recovery for the repair work and lost business from the storms, but it is too early to share any of those details. Based on what we see today, we expect that incremental capital expenditures needed at Wailea will likely mean that we will be in the upper half of our existing CapEx guidance range for 2026. We are still working through the details of the approach and timing, the required spend, and cost recovery from our insurance policies, and will share additional information as part of our next call. With that, I'll turn it over to Aaron. Please go ahead.

As we noted, at the top of the garage-based strength at 14.6% in the quarter, including an 890 basis point benefit from Mondau's Miami Beach. Total rev par for all hotels increased 13.4 percent including an 810 basis point given our mix of business we anticipated that rooms revenue would grow faster than total revenue in the first quarter which was the case but ancillary spend performed better than we thought but a more optimistic outlook for a stronger top line performance in the quarter contributed to earnings that were ahead of our expectations including adjusted EBITDA RE of $68 million, an increase of 18%, combined with the added benefit of our accretive repurchase activity. Adjusted FFO per diluted share was $0.27, an increase of nearly 29%. Our balance sheet remains strong. We have no debt maturities prior to 2028, and net leverage stands at only 3.5 times trailing earnings, or 4.6 times, including our preferred equity. Since December of last year, we have repurchased over $19 million in liquidation value of our 2% discount. A positive impact included in our press release this morning are the details of our updated Our revised guidance ranges reflect the outperformance we saw in the first quarter, but retain a degree of caution for the balance of the year, given the uncertain backdrop. We now expect we'll increase between 5% and 7.5% to a range of $236 to $242. This reflects the full-year benefit of ONDOS Miami Beach, which is expected to contribute approximately 400 basis points of growth at the midpoint. Based on what we see today, we now expect total REV PAR to increase between an increase of 125 basis points at the midpoint, which captures our higher expectations for growth in ancillaries. This would now imply a range of $390 to $400, with a similar 400 basis point back. As we noted on our last call, the first quarter will be our strongest revenue growth quarter of the year, with the remaining growth quarters being between the lower end and the midpoint of our REVPAR. While ONDOS will certainly provide a lift to our results all year, the impact will become less pronounced as we get further into the year and begin to let more of last year's operations, with the revenue growth benefit estimated at approximately 500 basis points in the second quarter, and 150 to 200 basis points in each of the third. This revised revenue growth is now expected to translate into adjusted EBIT.RE in the range of $238 million to $252 million. Based on where we sit today, we expect our FFO per diluted share to now range from $0.88 to $0.96. This updated earnings per share range reflects the benefit of better operations and our recent share repurchase activity. In terms of the distribution of our earnings by quarter, based on the midpoint of our updated range, we played 28% of our full-year earnings, with the second quarter expected to comprise approximately 28% to 20%. And the balance split more or less evenly across. Moving to our return of capital, since the start of the year up to the end of April, we have repurchased $35 million of common stock at a blended price of $9.11. In addition, we have also purchased over $14 million of our preferred stock at a blended price of $19.84 per share or a 21% discount. Common and preferred stock repurchase activity has been accretive to both NAV and earnings And while we retain capacity and appetite for additional share repurchases, our revised 2026 outlook does not assume the benefit of additional buyback. In addition to our share repurchases, we have a $0.09 per share common dividend for the second quarter and has also declared the routine distributions for our series G, H, and I. Before we conclude our prepared remarks, I'll turn it back over to Brian for some additional thoughts.

Before we open the call to questions, I want to provide an update on our 2026 objectives. The company remains focused on realizing the value of our portfolio. Over the past few years, we have sold hotels at what have proven to be attractive valuations and redeployed proceeds into the most accretive option available at the time. While most of the proceeds went to repurchase common or preferred stock at a discount, we also acquired assets when our cost of capital became more competitive. Given the improving transaction market, We expect to recycle capital in 2026 and take advantage of strong private market values for certain assets. This would then allow us to redeploy proceeds into additional share repurchases at a discount to NAV or liquidation preference or potential hotel acquisitions under the right circumstances. We remain focused on executing transactions that will result in the best risk-adjusted returns to our shareholders. The board and management remain committed to maximizing the value for shareholders and are open to pursuing any alternative that would reasonably be expected to result in value creation. With that, we can now open the call to questions. Operator, please go ahead.

To ask a question, please press star followed by the number 1 on your telephone keypad. In the interest of time, we ask that you please limit yourself to one question and one follow-up. Our first question comes from Dwayne Fettigworth from Evercore ISI. Please go ahead. Your line is open.

This is Peter on for Dwayne. Thanks for taking the question. So I guess if we zoom out and think about the 14-hotel portfolio and that portfolio, you know, reaching some level of stabilization, what are some of the building blocks left to get there? and I guess said differently, you know, what are some of the growth drivers beyond what you've provided for 2026?

Sure. Good morning. Let me start and then Aaron can provide some more additional detail. When you look at the building blocks, you know, there are several pieces. First, on does is a is a multi-year story q1 the resort is ramping up you know we started to see this at the end of q4 last year and into q1 this year and it's ramping and and the the group business has been very strong the transient business continues to grow and and we're very happy with the performance so far That said, when we look at Q1 and we look at our rate, which was, you know, in the mid-500s, and we look at the comp set, we still have a lot of room to grow. And so we are – the comp set was running, you know, kind of plus 1,000. So that's a lot of room for us to expand into next year. Also, fourth quarter last year was kind of the same delta. And so fourth quarter this year, we have room to grow. Opening the bazaar at the end of this year into the high season, the beach club just opened, which also serves as additional meeting space for the resort. So Onda's has a very good two year plus trajectory on that. Maui is also another asset where we had, you know, we had room to grow. We talked about this last year of having to have the islands stabilize, and we saw that with Kanapale reaching kind of a stable 70% occupancy in the fourth quarter. Our transient volume started to recapture our index and our share in the fourth quarter of last year. It's gone into this year, and given where we are relative to prior EBITDA, There's still several millions of dollars of EBITDA growth that we will get into next year. San Francisco is another market for us that has grown and rebounded very well, but still has quite a ways to go. And everything we're seeing in that market from the group demand, from the transient demand, from the citywide demand, that's all been very positive and we'll go into 27 and beyond and then you know as far as San Francisco's strength we've also seen that help wine country and the two resorts there where as the city wise and the city of San Francisco does better it then it then leads into additional leisure demand up in wine countries so I think that those are you know those are the big pieces that we will continue to see

grow throughout the next few years yeah and there's what I might add to that I think Brian hit you know this is certainly the broader points of what we have going on across the portfolio I think on top of that we have the added benefit of the repurchase activity that we've been doing so we've been thoughtful in how we've allocated capital both to our common stock and most recently to our preferred stock as well. So as we think about just the potential for not just EBITDA growth, but growth on an earnings per share basis, certainly we have capacity for significant increase in an FFO per share. Thank you.

Thank you. And then I guess you mentioned the transaction markets are getting more active. Could you just quickly expand on that? And what sort of assets are you seeing being marketed? What are brokers saying? So on and so forth. Thanks for taking the questions.

Sure. You know, we see additional equity capital coming into the markets and into increasing the number of deals out there and potential transactions, which is good and healthy for that market. Right now, you're seeing more luxury assets out there. And so I think that that is, you know, given where the recovery has been and given where the demand and productivity of those assets, there's a lot more on the luxury side. I would guess that as the year goes on and some of those transactions are announced and closed, we'll start to see more of the higher quality for upscale assets come to market, too.

Our next question comes from Michael Bellisario from Baird. Please go ahead. Your line is open.

Brian, I just want to follow up on your acquisition commentary.

Maybe a high level can you talk about the criteria that you're looking at for potential acquisitions, just in terms of markets, brands, initial yields, and then also just the appetite for maybe buying a cash-flowing asset versus doing another deep return renovation project.

Sure. You know, I think, you know, with what we've done in the past and the way we've approached things in the past, I think it's important, especially, you know, for a hotel, for a portfolio our size, is to make sure that we have some degree of balance. And so we have, you know, we have a lot of deeper turns that are coming back online or ramping up assets. so would we have capacity for that yes um that said you know like anything everything we do we have to we have to look at what the options are available to us and what is the best you know allocation of capital whether it be using our balance sheet or recycling an asset on a risk adjusted basis what makes the most sense for our shareholders and up into this point That has, you know, absolutely been share repurchase and repurchasing our preferred at a meaningful discount to liquidation preference. You know, going forward, that's a balance. That's something that, you know, as our cost of capital, you know, improves and our stock price improves, then we look to balance that with potential acquisitions or, you know, and mainly coming from recycling capital where we can take advantage of private market values and maybe specific markets where – or specific asset types where there is a lot of demand right now. And we can, you know, potentially realize a portion or a good portion of the future upside today and then go redeploy that. It's something that has good growth, maybe not quite as good growth, but at a at a much more compelling initial yield that maybe provides some some future opportunities so you know again it's it it depends every day we make we make the decision of how we're going to allocate additional capital um and you know i think where we stand right now it's our our stock and preferred is still very compelling um but as that changes i you know i think that the preference would probably be more stabilized you know if you look at the types of hotels and resorts that we have we like we like assets usually slightly larger assets that have a good group component to it and then some secondary whether it be leisure or business transient um you know varying degrees of rebranding activity whether it be like the west in dc or the marriott long beach where um you know different degrees of renovation but still same game plan where we're able to capture more index through finding a brand that, you know, could do better as something else. So, you know, that's our focus. I think where we are today, it's still, you know, our equity and preferred are very attractive. But as things, you know, as the space improves, I think that gives us more opportunity to deploy into assets. Welcome.

Thank you.

Our next question comes from need throws from city please go ahead your line is open hi thanks um maybe just switching to a couple of market questions i wanted to ask you um on the ondas i think in the past you had talked about maybe mid to low teens ebitda uh contribution this year you still comfortable with that and um are you seeing any kind of lift from there from the world cup uh helping that property Sure.

Morning, Smith. Yeah, we feel based on where the asset has performed, and remember there's, you know, you look at the seasonality of the market, the asset will be a little bit skewed more towards the first quarter this year just as it's ramping up. But, you know, first quarter in through kind of April is a big piece of the annual EBITDA. So based on what we've seen so far, based on the transient bookings going forward, based on our group bookings going forward, we feel very comfortable with the range we've given and, you know, probably inching towards the higher side of that and with some opportunity to achieve that this year. As far as the World Cup goes, you know, we've had really good events in the market this year, national championship. F1 last weekend was fantastic. You know, I think World Cup, we continue to be measured in our various markets where we have matches. And, you know, at this point, it's a good time in the year for Miami because the summertime tends to be the lower season. So having additional international travel coming into the market will be good for the market. Again, as we get closer, we will have a better understanding of the ultimate impact. But right now, we continue to be somewhat measured across our markets for World Cup.

And then I just was hoping you could maybe comment on a couple of the larger group markets where you operate. You mentioned a lot of strength, I think, at the JW in New Orleans. Are you seeing strength overall in that market? It seems like it's been kind of weak maybe on the group side. I'm just wondering what you're seeing, bigger picture, and maybe just kind of touch on, if you could touch on Orlando and San Diego as well.

Yeah, and so our, you know, when we look at first quarter and second quarter, transient has been the strongest segment across the board. And transient at some of our large group hotels have been, you know, better than anticipated. The way our group calendars and group bookings laid out this year was always the first half was sort of the weaker of the two, the two and that our pace picked up in depending on the asset q2 q3 q4 and so when we look at like you know who has group good group pace in the second half of the year that's where we're talking about New Orleans where we're paces up significantly for the second half Orlando also had a tougher first half comp will have a tougher first half comp first quarter and first half but has a really good second half DC has stronger city-wise and and does pick up and then there's some events in DC that should be helpful so when we look forward we have a great transient base of business for the next six months that has booked it looking very strong we didn't have the greatest group bookings in the first half but when we look at the second half of the year that's where it really picks up and that's where we did you know we start feeling pretty good about what the the setup is for the second half now there's also some other variables out there that could impact travel that could impact fuel costs and so again we like what we see we like the setup we are going to remain you know i think like others measured until we get a little bit more time to see what other external impacts there could be yeah makes sense okay thank you appreciate it our next question comes from daniel pulitzer from jp morgan please go ahead your line is open hi this is michael hirsch on for dan today thanks for taking my question i'm sort of on you know on that last answer there um in the prepared remarks you had mentioned seeing some group cancellations during the first quarter across the portfolio um could you provide any additional color on attrition or overall group trends and and pacing for this year next yeah i mean overall overall attrition is is probably down slightly from where we were last year I mean there were some some talk about other external forces there was a lot of government cancelled last year so attrition is down across the board but that's how you know we're always gonna have cancellations throughout throughout the year and there's always parts that there's always some attrition throughout the year Some of the storms on the East Coast did impact various groups, and so there's probably two different weeks of that where we had some groups that either couldn't get to the destination or had to cancel the last minute based on some storms, so again, I think those were more specific to the weather or or specific events and not overall you know group patterns I think what we are seeing on the group side is we're seeing the ancillary spend continue to be very strong we continue to see corporate groups and associations both both perform well and as I said before our group pace does pick up into the second half of this year and we have you know it's a little early to talk start talking about future years but but 27 pace looks good at this point thank you and then um for my follow-up you touched on world cup in miami but for your broader portfolio could you remind us what your outlook is for the rev part uplift and what about recent world cup demand trends are leading to your more measured approach but I think our measured approach is how we start we were we didn't have you know it was too early to have bookings there was the expectation that things would be very strong but again not having that not having a recent history and not having the business on the books we felt it didn't make sense to to get out over our skis and start anticipating rate increases and major demand. So I think that we started the year measured. As we get closer, we've seen different data points and other either through the brands or others saying that it is going to be a shorter-term booking window. you know we do have some group business on you know I think but it's limited there's a big group in San Francisco group in Miami and so there's there is some but if we see international travel very strong during that time period and you know last-minute bookings pick up then that will just that that will be

additive to our you know to our third quarter um but not second and third quarter but not in any of our guidance thank you our next question comes from tim billingsley from compass point please go ahead your line is open i just can uh thank you for taking my question i i wanted to follow up on out of room spending um your total rep par guidance um grew faster than the rep par And I'd like to know, Miki, could you talk about what's driving some of that? How much of it is a fixed spending in what you have associated with the room? And how much of it is discretionary?

Well, I think even with groups, good morning, Ken. Even with groups, there's a portion of it is discretionary. You have your minimums, you have your contracted amounts. But as you get, you know, closer to the event, people buying up and groups buying up different things, adding things, and in certain times they subtract things. You know, what we've seen in the first quarter, and not just specific to corporate group, we've seen it with association too, is we've just seen a better spend. And those, you know, the contractual amount is there, but the additional add-ons or upgrades, whether it be through AV, through food options, beverage options, what have you, is that we have, you know, it was a strong quarter for that. And we don't see that slowing down at this point.

And away from just the group-specific and out-of-room spending not related to the group, I would imagine you're seeing that being stronger as well?

Yeah, it's also a function of occupancy pickup, too, right? So in Waialaea, that's a market where you have a significant out-of-room spend for your transient customer. As we regain our occupancy share, that was happening during the quarter and will continue throughout the rest of the year. those customers spend more money at the bars, at the restaurants, at the other events and amenities at the hotel. So, yes, absolutely, we're seeing that on the transient side, too. you know more at the resorts than at your you know at a business transient hotel where there's less options to sure okay so so so a lot of the uplift there is on the occupancy side not so much that they're necessarily spending more per room well on the group side we're spending more per occupied room on the occupancy on the transient side it's going to depend um hotel by hotel maui i would say it's probably a mix of both and that's um but at the um you know at some of the more luxury resorts in in wine country there's you know there's there's just generally more spend whether it be spa food um occupancy that hasn't you know was up a little bit over the in the quarter but we're seeing strong spend across great thank you our next question comes from Chris Darling from Green Street please go ahead your line is open thanks good morning Brian I understand you know guidance may prove conservative but if I sort of look at what's implied for the rest of the year it would seem to suggest sort of flattish maybe

even slightly declining margins for the rest of the year. Hoping you could put that outlook into context and also talk about just generally how you see expenses trending for the rest of the year.

In general, we see our expenses are increasing 3.25% to 3.5%. And so if you look at the REVPAR gain distribution quarter to quarter, first quarter was was our biggest growth and it will be our biggest growth for the quarter and so our margins obviously we had margin expansion during during the first quarter as we go throughout the rest of the year you know luckily we we saw good productivity in the first quarter we are endeavoring in planning on having you know maintaining productivity or increasing our productivity especially in the rooms department because that's the most valuable and so depending on where rev par shakes out for the rest of the year you know we can be possibly you know positive just slightly up to you know think you know or maybe neutral for the rest of the year so um you know it'll depend on if we're conservative on the revpar side then we'll we'll absolutely have better flow through and and margins will will tick up um but right now um given where the the implied revpar guidance is for the remainder of the year and that expenses are growing in that lowish to mid-3%. We'll revise it when we have another quarter or so under our belt, but right now we figured that that was the most prudent thing to do.

Okay, understood. I may have missed this earlier, but could you elaborate on some of the recent operating performance at the wine country hotels and just your outlook for the rest of the year there?

Yeah, I mean, first quarter is the low season there and so it's the most challenged on occupancy side and so the key to to that profitability or trying to get to break even in the first quarter is really making sure you have the right amount of group business and that's something we've been talking about for a couple years now and really folk and having the the resorts focus on is try to get that right group base in there and And, you know, that group base comes at a lower rate, but comes with a higher ancillary spend. And so, you know, the hotels or the resorts have worked very hard to get as much group on the books as they can. And quite honestly, they both had great group on the books this year. I mean, this is, you know, in the works for a while, but they've been able to get that good first quarter group base. um transient demand has been better than expected so that benefited uh both and then you know while we had bad weather on the east coast and in hawaii also in california and in wine country they had great weather um for the first quarter this year and so that helped also so all those factors kind of came together and and gave us you know the first quarter we were very pleased with going forward both hotels have continued to have very good transient demand Four Seasons has very good group pace for the second half of the year Montage has has decent group pace Montage is a you know maybe a little farther ahead of Four Seasons as far as establishing its group business, which is something that we're doing more group room nights this year than we've ever done before. It's probably about 55% of total occupancy. We'd like to see that in check to about 60%, 65%. That would be ideal for that asset. But both, whether it be luxury is outperforming and combine that with the demand we're seeing and the improvements we're seeing from the Bay Area that feeds up there, our outlook for both is very strong for the rest of the year.

Okay. Thank you for taking the questions. That's it for me.

Our next question comes from Flores Van Dykem from Leidenberg. Please go ahead. Your line is open.

Okay. Thanks, guys. Just maybe following up on the wine country hotels. I mean, the performance was, you know, even though it's still a loss, it's, you know, 4 million improvement in terms of EBITDA relative to the first quarter of last year, which is pretty meaningful. As you think about your disposition plans, are those potential still candidates in your view, particularly now that the JW Marriott and Marco Island has sold and the luxury market seems to be unthawing in terms of financing and availability?

Yeah, I don't know if Marco Island is a direct comp for these two, but, you know, look, I think we've been very clear. We're looking, you know, when we look at our portfolio and we look at potential dispositions, we want to capitalize on private market values and that there are certain types of assets right now and luxury absolutely being one of them. and markets where there's a lot of interest. We don't comment on transactions before we have something to publicly say, but based on our actions in the past and based on the criteria I just highlighted, We're clearly out there exploring various opportunities, really at all times, but to make sure that we can have assets that we can recycle and redeploy those proceeds either into our common, our preferred, or as I said earlier, if things improve, different acquisition targets. But monetizing low-yielding assets is something that could be achievable right now in the current market, and we'll look at doing what we can. There are a lot of luxury assets out in the market right now. I mean, there are older portfolios that are coming back. So there is a lot of supply out there, but, you know, this is a core tenet of our strategy of redeploying and recycling assets. So it's something that we're focused on doing.

Maybe a follow-up. I mean, obviously operations, you know, are definitely, you know, trending the right way right now. But your guidance is, again, you're like everybody else and all your peers. Everybody's staying very cautious. What are the – maybe touch on – are there outliers in terms of the World Cup impact that it could have based on, you know, what your outlook is today? I mean, what's the upside if the World Cup does pan out to be better than what you're expecting in your view?

Yeah, I mean, that will add significant compression. When we look at the state of the industry, or at least what we're seeing in our portfolio, Q1 had great transient demand. The next six months of transient bookings are up significantly, and they're not just up at resorts. They're up at our convention hotels, they're up at our urban hotels, and they're also up at our resorts. So transient is very strong. Our second half group pace is very strong. And so group business is strong. Group contribution is strong. We see the hotels booking significant current year and future year business. So all of that is strong. So all these positive points, if World Cup comes in stronger, then that's just that's additional compression and an additional benefit um that will that will accrete to our our performance um you know the conservatism and the caution is that you know there are events out there that could impact the cost and demand of travel and so because of that But, you know, we and I think most of our peers in the industry will remain cautious until we see those potential impacts, you know, alleviated.

Thanks, guys.

Our next question comes from Logan Epstein from Wolf Research. Please go ahead. Your line is open.

Yeah, thanks for taking the question. Maybe just one for me. The last part you guys talked about, staying on the topic of transient demand, you guys talked about government-related was coming back to San Diego in the first two months of the year. Just curious if you saw that trend continue into March and April, and then how you expect that to impact both San Diego and D.C. for the rest of the year.

So we saw really the largest increase in transient demand was in Long Beach in the first quarter. And there's defense and other businesses in there, government-related businesses. So we saw a good pickup in Long Beach. San Diego, we saw transient pickup. It was more negotiated and then some discount also, which the negotiated piece of it could be government-related because it could be consultants and contractors and that work. So in D.C., I think we saw a little bit less in D.C., but we saw a strong transient, and what the transient in D.C. is really coming from is the rebranding to a Westin. We're picking up more corporate accounts, more retail accounts, and so when you look at our rate and our occupancy index compared to pre-Westin, we're definitely gaining share on the market. And so, while some of that is – everything in D.C. will be government-related, what we're really seeing there is the benefit of the rebranding that we did.

Thanks, Brian. I'll leave it there.

Our last question comes from Chris Warronka from Deutsche Bank. Please go ahead. Your line is open.

Hey, good morning, guys. Thanks for taking the question. um brian you know you covered a lot of ground on on miami on andaz and kind of what still needs to happen to get fully ramped up and seems like you had a good start q1 um but can you maybe just flush out a few more details on i know there's still obviously a rate story but is there also kind of a group story to this and i guess more ancillary i don't know how much like beach club you mentioned before we'll factor in so just trying to trying to get a sense for how much is strictly rate which should have obviously nice flow through versus kind of group and other things that that still need to happen thanks sure um you know our our target and morning chris um our target

for group is probably about 25 percent for the hotel and this year we'll run 20-ish percent of the business group which is better than we anticipated going into the year we've actually seen not only group volume but the quality of the group continue to improve as we move throughout the year you know Miami is a repeat market both for the transient customer and the group customers so you know that that quality of group whether it be at the end of the year for our basil or or other other major events is that you know we didn't really participate in that last year and so we'll have groups in this year and next year we'll probably have even better groups in and so while we have some occupancy on the group side we also the group side is also will be a rate story um and then also at the end you know in the end of the third quarter fourth quarter uh when bizarre opens that's going to bring a level of energy and notoriety into the hotel where you know that's going to be a big catalyst when it comes to the overall rate of the hotel or the resort also so everything has accelerated in the first quarter where we've seen the group pick up the group demand the quality of the group increase and so while there's still occupancy there there's still ancillary spend there as we move into next year it starts to become more of the rate story and we have a lot of space between our current rate and the market rate where that will be very meaningfully very meaningful to the cash flow of the hotel.

Okay. Very helpful. Thanks, Brian.

We have no further questions. I would like to turn the call back over to Brian Jilly after closing remarks.

Thank you, everyone, for your interest, and we look forward to seeing many of you at upcoming conferences and look forward to also anyone that we have the chance to get through the new ONDAHs. We've had many tours but are always available to show off this really remarkable resort. Thank you.

This concludes today's conference call. Thank you for your participation. You may now disconnect.