Xenia Hotels & Resorts, Inc. (XHR) Q1 2023 Earnings Call Transcript

Good morning. Thank you for joining Xenia Hotels & Resorts First Quarter 2023 Earnings Conference Call. My name is Megan, and I will be your moderator today. Now, I would like to hand the conference over to Amanda Bryant, VP of Finance. Amanda, please proceed.

Thank you, Megan. Good morning, and welcome to Xenia Hotels & Resorts’ First Quarter 2023 Earnings Call and Webcast. I’m here with Marcel Verbaas, our Chair and Chief Executive Officer; Barry Bloom, our President and Chief Operating Officer; and Atish Shah, our Executive Vice President and Chief Financial Officer. Marcel will begin with a discussion on our performance, Barry will follow with more details on operating trends and capital expenditure projects, and Atish will conclude today’s remarks on our balance sheet and outlook for 2023. We will then open the call for Q&A. Before we get started, let me remind everyone that certain statements made on this call are not historical facts and are considered forward-looking statements. These statements are subject to numerous risks and uncertainties as described in our annual report on Form 10-K and other SEC filings, which could cause our actual results to differ materially from those expressed in or implied by our comments. Forward-looking statements in the earnings release that we issued yesterday, along with the comments on this call, are made only as of today, May 3, 2023, and we undertake no obligation to publicly update any of these forward-looking statements as actual events unfold. You can find reconciliations of non-GAAP financial measures to net income and definitions of certain items referred to in our remarks in the earnings release, which is available on the Investor Relations section of our website. The first quarter 2023 property-level portfolio information we will be speaking about today is on a same-property basis for all 32 hotels. An archive of this call will be available on our website for 90 days. I will now turn it over to Marcel to get started.

Thanks, Amanda, and good morning to everyone joining our call today. We are pleased with our first quarter results, which reflect a strong start to the year. As expected, our portfolio experienced significant RevPAR growth in the first quarter compared to 2022, particularly in January and February, as we lap the negative impact of the Omicron variant at the beginning of last year. Overall demand in the quarter reflected the continued transition in our business to a more normalized mix of leisure, corporate transient, and group demand. This trend particularly aided performance in our hotels and resorts that have traditionally been more dependent on corporate transient and group demand, and that, in many cases, were more significantly impacted by the Omicron variant during the early part of last year. For the quarter, we reported net income of $6.3 million, adjusted EBITDAre of $71.3 million, and adjusted FFO per share of $0.40, with all of these measures reflecting significant increases over the first quarter of last year. Same-property RevPAR in the quarter was $179.55, an increase of 23.9% compared to 2022. The majority of RevPAR growth came from occupancy, which increased roughly 10 points compared to the first quarter of 2022, while average daily rates increased 5.2%. As compared to the first quarter of 2019, RevPAR for the 30 hotels we currently own that were open at that time was down just 1.6% for the quarter. For these 30 hotels, which excludes Hyatt Regency Portland and W Nashville, occupancy was roughly 10 points below 2019, while ADR was up 13.5%. Adjusted EBITDAre of $71.3 million reflected growth of 42.8% over the first quarter of 2022. Margins improved by 167 basis points compared to the first quarter of 2022 despite continued inflationary pressures, particularly in labor and utilities. Importantly, the demand recovery continues to broaden. In the first quarter, 8 of our 10 largest markets, as measured by 2022 EBITDA contribution, reported double-digit RevPAR increases compared to the first quarter of 2022. RevPAR for the Dallas hotels increased by more than 50%, while RevPAR grew more than 30% in our Houston, Atlanta, and San Francisco/San Mateo hotels. Outside of our top 10 markets, Portland and Santa Clara experienced RevPAR increases of more than 60% and 70%, respectively. These are all markets with larger hotels that have a relatively higher dependence on business transient and group demand, and they are still performing well below 2019 levels. Therefore, we continue to believe that these markets present the greatest potential for recovery and earnings growth in the quarters ahead. Conversely, the 2 top 10 markets with RevPAR decline in the quarter, Key West and Napa, lapped particularly strong performance in the first quarter of 2022 as Omicron did not meaningfully impact demand in these areas. Additionally, the unusually rainy weather had a substantial negative impact on demand in Napa for the quarter, with the poor weather conditions also affecting leisure demand in the remainder of California. Despite the uncertainty in the economy, we have not yet observed any signs of broad-based demand slowing. The second quarter is off to a good start against a challenging year-ago growth comparison. We estimate that our preliminary April same-property RevPAR is approximately $196, which would be down roughly 2% compared to April 2022. Preliminary April occupancy of 78.7% is nearly flat compared to 2022, and preliminary ADR is down approximately 2%, reflecting the demand mix shift we are witnessing in the portfolio. For the 30 hotels that were open in 2019, preliminary RevPAR for April was approximately $197, which would be a 1.1% increase compared to April 2019. These preliminary results are encouraging given the historical seasonal strength of the month of April within our portfolio, including very strong leisure-driven performance in April last year. We remain cautiously optimistic for the balance of 2023 and beyond based on the trends we continue to see in our business. With first quarter results coming in as we expected 2 months ago and preliminary top-line performance in April also matching our expectations, we are reiterating the midpoint of our full-year outlook for RevPAR growth and adjusted EBITDAre. Atish will provide additional details on our updated guidance during his remarks. Let me highlight 4 key factors supporting our long-term optimism. First, as I have mentioned, our portfolio is returning to a more traditional mix of business. Historically, about 1/3 of our mix was group. With continued momentum in group booking pace for 2023, our current group revenue on the books for 2023 is only about 6% of the high 2019 levels for the 30 hotels that were open at that time. Including our recent acquisitions, Hyatt Regency Portland at the Oregon Convention Center and W Nashville, group room revenue on the books for 2023 is currently about 20% ahead of 2022 levels, driven by increases in both room nights and rate. We are also seeing continued momentum in corporate transient business. Midweek occupancies continued to improve meaningfully in the first quarter, increasing by mid-teen percentage points on both Tuesday and Wednesday nights compared to the first quarter of 2022. Second, we have numerous growth drivers embedded in our existing portfolio that we believe will support growth this year and beyond. As mentioned previously, we have recovery potential in our leisure, urban, group, and business transient focused hotels, mainly Marriott San Francisco Airport, Hyatt Regency Santa Clara, our 2 Dallas hotels, and our 3 Houston hotels. These 7 hotels reported more than 40% RevPAR growth on average in the first quarter compared to 2022. However, EBITDA for these 7 hotels in the first quarter of 2022 was still approximately 22% below the first quarter of 2019. We also own several recently renovated properties and properties undergoing renovations that are soon to be completed, which we expect to be meaningful internal EBITDA growth drivers. These include Hyatt Regency Grand Cypress, Park Hyatt Aviara, Waldorf Astoria Atlanta Buckhead, and Grand Bohemian Hotel Orlando, among others. Looking further ahead, our upcoming transformation of the Hyatt Regency Scottsdale Resort & Spa at Gainey Ranch to a luxury Grand Hyatt resort is expected to be a meaningful contributor to our future growth. And Hyatt Regency Portland at the Oregon Convention Center and W Nashville are continuing to ramp as the base of group business builds at both properties. We continue to believe that both will serve as significant drivers of future EBITDA growth as these properties stabilize over the next few years. Third, our flexible balance sheet, which was further strengthened as a result of our recent activities, supports continued investment in our portfolio while also balancing returns to shareholders in the form of share repurchases and our $0.10 per share quarterly dividend. And fourth, Xenia’s portfolio of high-quality hotels and resorts will continue to benefit from diminishing levels of new competitive supply as the environment for new hotel development remains challenging. Based on the most recent data from Lodging Econometrics, weighted room supply growth in our submarkets is expected to be just 1.2% in 2023 and 1% in 2024. This represents a meaningful reduction in growth from about 3% annually just a few years ago. As for the transaction environment, we believe we are very well positioned to remain opportunistic regarding essential future acquisitions. We continue to look at opportunities that meet our criteria, including top 25 markets and key leisure destinations. However, we are willing to be patient as the overall environment continues to evolve and as we evaluate all avenues to drive shareholder value.

Thank you, Marcel, and good morning, everyone. As Marcel indicated in his prepared remarks, the same-property leaders in terms of RevPAR growth in the quarter included many of the hotels that lagged over the past 2 years, suggesting that recovery is now more broad-based. RevPAR grew in excess of 30% in our hotels in Dallas, Santa Clara, San Francisco, Houston, Philadelphia, Washington D.C., Atlanta, and Portland. While it may seem surprising that we call out strength in San Francisco given much of the negative press, our hotel, the 688-room Marriott in the San Francisco Airport is recovering very well. This property is benefiting from improving group demand, recovering international air travel, and improving business transient demand, particularly from life science-related corporate accounts. As expected, results in the first quarter varied across the months in the quarter as we lap the impact of the Omicron variant in early 2022. Same-property RevPAR in January increased a very robust 49.5% and moderated to a RevPAR increase of 10.4% in March as compared to 2022, despite the impact from several renovations and severe weather that affected several of our California properties. Rate growth in the first quarter at our same-property portfolio moderated a bit on a mid-teens percentage increase in the last several quarters to up 5.2% as compared to 2022. We are optimistic regarding corporate and group rates, particularly as we achieve higher mid-week occupancies in a number of our larger hotels in urban markets, including Santa Clara, San Francisco, Houston, and Dallas, particularly on Tuesday and Wednesday nights where these higher occupancies are providing meaningful rate compression opportunities. Our managers anticipate further improvement in corporate transient business fundamentals and continue to expect negotiated corporate rates to increase in the high single-digit percentage range this year. Business from the largest corporate accounts across our portfolio continues to improve, with March representing the strongest recovery to 2019 since the beginning of the pandemic. On average, rate growth at our leisure-oriented hotels in the first quarter was below that of our same-property portfolio, but still positive compared to the first quarter of 2022, with rates well above 2019 levels. We saw rate declines in Key West and Napa off historic highs through the pandemic, yet we reached nearly 40% above 2019 levels, and rates did increase in Q1 at our other leisure-oriented properties in Orlando, Savannah, Charleston, and Arizona. Now turning to expenses and profit. First quarter same-property hotel EBITDA was $77.2 million, an increase of 33.6% on a total revenue increase of 25.9% compared to the first quarter of 2022, resulting in 167 basis points of margin improvement. The significant improvement in the hotel EBITDA margin for the quarter reflects our operators’ ability to manage expenses while also benefiting from significantly better revenue in areas such as food and beverage, up more than 35% for 2022, the banquet and catering revenues up over 60% compared to 2022 as a result of high-quality group business, both of which contributed to significant levels of food and beverage profit. Group-controlled room expenses also contributed to EBITDA margin expansion, as improved occupancy spread the fixed operating costs over a broader base. Most payroll expense was up roughly 20% compared to the first quarter of 2022. Group margins in the operating departments were somewhat offset by increases in areas such as utilities, which were up approximately 24%. With respect to labor overall, our operators successfully staffed up last year to meet strong recovery and demand where necessary and have been able to better fill open positions. In general, our fully recovered hotels are operating at FTE staffing levels between 90% and 95% of pre-pandemic levels, while hotels where there is still substantial opportunity for recovery are operating at FTE staffing levels at approximately 75% of pre-pandemic levels. Now turning to CapEx. During the first quarter, we invested $11.6 million in portfolio improvements. At the Grand Bohemian Orlando, we completed the comprehensive renovation of public spaces, including meeting space, lobby, restaurant, bar, Starbucks, and the addition of a new rooftop bar. A comprehensive renovation of the guest rooms will commence in the next several weeks. At Canary Hotel in Santa Barbara, we have just completed the comprehensive guestroom renovation and are now looking forward to the benefits of a fully renovated hotel. At the Ritz-Carlton Denver, the recently completed renovation and reconfiguration of the premium suites resulted in 3 additional keys added as of April 1. At Park Hyatt Aviara, we continue to work on the significant upgrade of the resort spa and wellness amenities, which we branded as the Miraval Life in Balance Spa upon completion late in the second quarter. We also continued planning work at the Hotel Monaco Salt Lake City on a comprehensive renovation of meeting space, restaurant, bar, and guest rooms. It is also expected to commence in the second quarter. Finally, the comprehensive $110 million renovation and up-branding of the 491-room Hyatt Regency Scottsdale Resort & Spa at Gainey Ranch is expected to begin in June, with the expected completion of all phases by the end of 2024. The project will formally kick off with a complete renovation of the 2-acre pool complex in early June, with an expected completion date by the end of this year. Doubling the size of the largest existing ballroom to 24,000 square feet and renovation of the existing meeting space would begin in early July and is expected to be completed along with the renovation of all other meeting spaces by the end of 2024. Guestroom renovations are expected to begin in the fourth quarter and are expected to be completed in the second quarter of 2024. Finally, the comprehensive renovation of all other public-facing spaces, including the lobby and the transformation of all food and beverage venues, is expected to begin in the second quarter of 2024, to be completed by the end of 2024. We note that this renovation is nearly all guest space as the building systems have been very well maintained over the property’s history. Upon completion, the property will have 5 additional keys or 496 rooms and will be rebranded as a Grand Hyatt Resort. Including the aforementioned projects, in 2023, we expect to spend approximately $130 million to $150 million on capital expenditure projects. Of this amount, approximately $45 million will be spent at Hyatt Regency Scottsdale. This is consistent with our initial guidance provided in early March. We are excited about the work our in-house project management team has completed and are even more excited about the projects we have underway and in various stages of planning in 2023.

Okay. Thanks, Barry. I will provide an update on our balance sheet and discuss our guidance. As to our balance sheet, it continues to be a strength of the company. As we have previously discussed, in January, we completed a recast of our line of credit, entered into new bank term loans, and refinanced our property mortgage loan. These actions improved our balance sheet profile. At present, we have no debt maturities until the second half of 2025 and about 80% of our debt has fixed interest rates. We continue to have a fully undrawn line of credit and a strong liquidity position. We continue to be active on the share buyback front. In addition to the shares we repurchased last year, thus far in 2023, we have repurchased nearly 3% of our outstanding shares at an average price of about $13.50 per share. At our current stock price, our implied value is approximately $270,000 per key for the portfolio, which we believe to be attractive given its high quality. We have approximately $125 million remaining on our share repurchase authorization. As to our dividend, we paid a $0.10 per share dividend in the first quarter on an annualized basis that reflects a yield above 3% on our stock. It also reflects a payout ratio of below 40% of projected FAD based on the midpoint of our FFO guidance. Moving ahead to our outlook. Group revenue pace continues to strengthen with the 2023 group revenue pace for the last 3 quarters of the year being up about 7% compared to last year. This reflects room night pace for the second through fourth quarter, which is up about 3% and room rates up about 3.5%. Overall, the year is evolving as expected, with a very strong first quarter, followed by expectations for lower levels of growth in quarters 2 through 4, given tougher year-ago comparisons and the impact of renovations. The midpoint for our full-year guidance for adjusted EBITDAre is unchanged from early March. The midpoint of our FFO per share guidance increased slightly due to share buybacks, and our guidance on interest expense, income tax expense, and G&A expenses were unchanged. As to our expected seasonality of earnings, our estimated percentage weighting of full-year adjusted EBITDAre by quarter is as follows: for the second quarter, about 30%; for the third quarter, about 20%; and for the fourth quarter in the low 20% range. I’d like to wrap up by reiterating that Xenia is well positioned with a curated collection of high-quality properties managed by leading operators and located in desirable markets. With lower industry-wide new supply addition on the horizon, we expect to have a long runway for growth. Our portfolio has several embedded drivers that we expect to utilize, and we will continue to utilize our balance sheet to drive additional growth over the next few years. We have historically done well managing through the various ups and downs in this cyclic business and expect our nimble profile and highly focused team to continue to deliver strong results. And with that, we will turn the call back over to Megan for our Q&A session.

Our first question comes from David Katz with Jefferies. Your line is now open.

Hi, good morning, everybody. Atish, can you just talk about leverage, leverage tolerance? Where you’d like to be? How you’re thinking about where you’d like to be? And just give us a little perspective there, please.

Yes, David. As you may know, we’ve been operating the company before COVID with a net-debt-to-EBITDA ratio in the low 3x to low 4x range, which we believe is the appropriate level of leverage for us overall. Currently, we are slightly above that, closer to 5x debt to EBITDA on a trailing 12-month basis. We anticipate that over the next few years, as earnings grow due to some of the opportunities we've discussed, we'll return to that optimal leverage range. This is the level we consider suitable for our business. Additionally, I want to point out that we do not have any preferred or other senior capital, so our balance sheet is quite straightforward, which reflects our debt profile.

Perfect. As a follow-up, regarding the M&A landscape, would you say you are more likely to be a seller or a buyer? Any insights on either side would be appreciated.

Sure, Dave. I’ll take that. From our perspective, we’ve done a lot of fine-tuning of the portfolio. We like the markets we’re in and the hotels we own. We believe there is growth potential in the portfolio. Therefore, I don’t see us being highly active on the disposition side at this time. We’ve narrowed down our portfolio to what we consider a carefully curated collection with substantial upside, partly due to some renovation activities we've undertaken. That doesn’t mean we won’t sell anything. If the right market conditions arise or if a renovation is due that we believe won't yield satisfactory returns, we might consider some additional dispositions. However, I don’t anticipate a lot of those. On the acquisition side, it’s about balancing the strategies to enhance shareholder value, as I mentioned earlier. We recognize significant value in our existing portfolio, which is why we’re active in share buybacks. The values outlined by Atish indicate we see great potential in our portfolio. We’ll monitor the acquisition landscape, but we don’t believe it’s the right time to be aggressive in pursuing acquisitions. As we progress through the year and as others face refinancing challenges, we think there might be better opportunities available.

Thanks. Just a couple of quick questions. On the food and beverage front, that spend was seemingly a bit higher than we were thinking. What’s driving that? And how sustainable do you think that is, Barry?

It’s really driven, obviously, directly by the group business that we enjoyed in Q1 compared to Q1 of 2022. We’re not seeing or hearing anything about softening in terms of the robustness of banquet and catering spend from groups. They continue to spend at significant levels. I’d note that the food and beverage spend continues to actually surprise our operators as well, where groups are often committing to relatively minimal food and beverage contributions as part of their contract. But as they arrive on property, as they get closer to programs, they still seem to be a bit celebratory in terms of what they want to spend on food and beverage overall and banquets, in particular from the groups.

Okay. And then on the leisure kind of resort side of your business, it seems like maybe not just with you, but with some of the other companies we cover that those ADR increases are moderating a bit. How sensitive are you finding the consumer, the leisure consumer to be these days to pricing in that product category?

I think it’s much less about the consumer and what they’re willing to spend as it is about the demand characteristics in the particular submarkets. Obviously, we highlighted Key West and Napa. Napa is a little bit of an outlier. It’s very hard to discern how much of our challenges there in Q1 were weather-related, but they were significantly weather-related. Key West is a more interesting example. We’re not seeing guests not willing necessarily to pay the price that there’s a lot more competition for the business within the market, and that has led to the moderation in pricing, more so than a consumer unwillingness to spend top dollar for a premium experience.

Okay. And then just lastly, Marcel, you mentioned the trends in April. I want to clarify what I think I heard. Is it that the price-insensitive revenge travel from 2022 is leaving the marketplace to some extent and is being replaced by more rational corporate and business travel? Is that what you think is happening and how it’s affecting ADR?

That’s certainly part of it. Looking back at last year, in April we were coming out of Omicron, and there was a surge in leisure travel that benefited many of our resort locations during that time. This year in April, demand is more balanced across group, corporate transient, and leisure segments. It’s a natural transition in our portfolio. We’re not overly concerned about rate stability; we have had extensive discussions with our operators and feel confident that consumers are still willing to pay these rates. However, we are noticing a slight occupancy shift among the different segments in our portfolio, which we view positively. We have seen good growth in our hotels that focus on business transient and group, and we are excited about that. The April results aligned with our expectations based on the strength observed last year. We remain optimistic about our projections for the second quarter and beyond. As we move further into the year, we will continue to navigate the overall economic situation, but for now, things are progressing as we anticipated at the start of the year.

Thank you. Good morning. I have a follow-up question regarding trends in the portfolio, particularly in April. I’m curious about what you're observing on the West Coast, especially since you highlighted strong year-over-year performance there in Q1. Have you noticed any increase in cancellations in April compared to March, especially considering the tech layoffs and the regional banking situation?

Good morning, Tyler. There is nothing particularly noteworthy to mention. Our most tech-dependent property is Hyatt Regency Santa Clara, and we haven't observed any significant declines in demand, whether from group bookings or corporate travelers. While there are fewer employees in the market, this has not led to any decrease in demand. In fact, we are seeing year-over-year growth, and the trends indicate no concerns in this market.

Okay. Great. And I just want to circle back on the buyback a little bit, if I could. Just talk a little bit more about how that fits in with how you’re thinking about capital allocation just in light of where leverage is right now and given some of the commentary on the potential deals that might be coming down later this year. I mean is your thoughts on the buyback more depending on where the stock is trading? Or is that more just compared to some of the other options out there? I mean is this like 12 to 14 level, ideally where you think you might be active in terms of repurchasing the stock?

Yes. Tyler, it’s Atish. I think we’ve always taken sort of a balanced approach to share buybacks, and we have bought back shares over the years from time to time. We view it as one tool in the tool set of driving shareholder returns. Obviously, it’s a little bit shorter dated in terms of how you do that relative to some of the longer-dated investments in our business, but that’s how we continue to view it, really as a tool, and we’ve taken a balanced approach towards it. It doesn’t mean that we’re not open to other projects in terms of growth projects, acquisitions, and things like that. And so that’s really the philosophy and the approach we’ve had. It’s certainly something we’ve employed in the past. We’re opportunistic about it. And as I mentioned, one data point was how we like the portfolio valuation on a per-key basis. You can look at external estimates of NAV as well, and you could look at it by cap rate. So across all those measures, we do evaluate them. We continue to feel like the stock is a compelling value. And so therefore, we acted on it. And so we have the authorization from the Board that’s got significant lead. Beyond that, I think we’ll continue to view it as a tool and that we’ll take a balanced approach.

Thanks. Good morning, everyone. First question just on the renovation disruption that $15 million that you guys have for the full year. Maybe how much of that did you experience in the first quarter? And then what’s sort of the rough cadence of that impact from 2Q to 4Q for the remainder of the year?

Yes. I mean we didn’t experience much of it in the first quarter, probably about $1 million worth, and then it certainly picks up kind of third and fourth quarter. That’s where we are going to experience more of the impact. A lot of it ties to the renovation project that Barry described in more detail in Scottsdale and the timing of the various ones. So just how the roll forward on that was.

So as you know, with the projects that we’re doing, first quarter, you saw the impact that we had at Canary Santa Barbara. As we get into the second half of the second quarter here and we get started on the rooms renovation at Grand Bohemian Orlando and the rooms renovation at Monaco Salt Lake City, we start seeing a little bit of an impact in the second quarter, but the bulk is really coming from the third and fourth quarter, with by far the majority coming from expenses.

Thank you for the question, Mike. I'll address your inquiries in reverse order. Regarding the short-term business, we are pleasantly surprised by the volume of short-term bookings at the hotels, especially in the larger properties. This type of business remains somewhat limited, as executing large programs within a short timeframe is challenging. We are noticing a strong commitment to specific dates, which we believe is beneficial for our hotels. It simplifies the decision-making process about whether they can accommodate the request. Companies seem to have predetermined their meeting dates before searching for hotels, giving hotels the opportunity to negotiate prices more effectively since those dates are fixed and options in the market may be limited compared to broader ranges of dates. Additionally, the growth we are observing has shifted slightly. While there was a strong demand from corporate clients that was quickly fulfilled, we are now beginning to see commitments for longer-term, larger corporate programs and association business being booked for future years. This process had been notably slow, but we are witnessing solid commitments from many of the larger hotels for 2024 and 2025.

Got it. And then just one follow-up there on the group side. I think there were a few comments by Atish just on the group rate for ‘23, anything on volume for the remainder of the year on the group side? And then also, what are you seeing on the books for 2024? Thanks.

Yes, sure. Yes, I did discuss the volume in my comments for the last 3 quarters. Sorry, if it didn’t come through clearly, but I said volume is up about 3% and rates up about 3.5%. And again, both those stats are for the second through fourth quarter. So the remainder of the year, taking out the first quarter, which obviously has a benefit due to the comparison to last year and Omicron. The only thing I would also point out with the pace is it’s inclusive of Scottsdale. Obviously, we had a lot of business in Scottsdale last year given the significance of the group business at that hotel. This year, the hotel is not filling up the business, given the upcoming renovation. So if you exclude that, the pace being up about 7%, that’s revenue pace, is actually more like 12% in that range. So that’s a pretty big drag on our numbers. So it’s just something to keep in mind when we think about pace that the remainder of the portfolio is actually quite a bit better than that 7%. And then as to 2024, it’s a little too early to talk about that. I know some of the peers have talked a little bit about 2024, but just given the nature of our business, a lot of it looks a little bit closer to the year and certainly, we have a big chunk that books in the year for the year. It’s because our group is a little bit more corporate and leisure-oriented than association-oriented. So first of all, we’ve traditionally not talked about it this early. And second, while even if we give you a number, it doesn’t round quite a bit between now and the end of the year when you talk about it. So a little premature. But I will say that we do feel pretty good about group business for 2024. The things that operators are telling us, some of the investments we’ve made into the properties, including the new ballroom here at Grand Cypress, which continues to get traction, the feedback that we’re getting on the Aviara renovation. So those are really good indicators for us. So despite the fact that we’re not giving you kind of a very early number for 2024, we do feel pretty good about 2024 and how it’s shaping up. W Nashville, Portland, I mean, those hotels that are new to us continue to ramp and do well from a revenue perspective.

Very good morning. Thanks. Barry, a question for you, which is we’ve heard from a couple of your peers that they’re starting to really focus on expenses at the property level, especially at some of the leisure or consumer-oriented properties. I’m curious whether you all have started to get into that kind of pre-recession mode of cutting costs.

Hey Bill, it’s Barry. I’ll take that one. As you know, we believe we do a great job of constantly reviewing expenses and collaborating with operators to identify opportunities. We have asked all of our hotels to take a closer look at where expenses have returned to and what future opportunities exist, regardless of whether business slows down. This is a regular exercise for us. Our impression is that this process has become easier due to the insights we gained during COVID. We've discussed how we worked with our properties to create operating models for various occupancy levels, making it a much quicker process to evaluate. The reality is that in some cases, expenses have increased to maintain excellent customer service, especially where rates have been significantly higher than before. However, we have a high level of confidence in our asset management team and the work they have consistently delivered. There is definitely a renewed emphasis on ensuring that expenses align with our current business levels and the potential outcomes for future business levels.

Thanks and good morning. Can you talk a little bit about the cadence of RevPAR growth expectations for the rest of the year? I think the guidance implies maybe around 1% growth post Q1 and renovation disruption will be more significant in the second half of the year, but April was down a bit from last year. So some color on the rest of 2Q and the year would be great.

Yes. Sure, Aryeh. When we had given guidance back in March and things haven’t changed really that much from then, we had talked about the RevPAR number. On the first quarter, we’ve come in as we expected, the second quarter being sort of slightly positive, and then the back half really being flat in terms of RevPAR to 2022. So, I would say, generally, we continue to view things that way. Marcel, I don’t know if you have anything to add here.

I’ll just add that, like I said, the April numbers came in for our expectations. So it’s not necessarily a matter of extrapolating that through the rest of the second quarter because we actually expected April to come in a little below last year, expecting a little bit of growth in May and June that will get us to kind of the cadence that Atish pointed out.

Got it. Looking at Nashville, it improved year-over-year. I'm curious about the occupancy number at 53%. How did that perform relative to your expectations in Q1? What is your outlook for the rest of the year?

On the RevPAR side, it closely matched our expectations. However, there's still significant work to be done, especially regarding food and beverage. We are concentrating on improving our operations, and we've had productive discussions with our operator about potential enhancements. Our outlook for this year and beyond remains consistent. I see substantial potential for growth in this property, particularly in the food and beverage area, where we haven't fully reached our goals. April's performance was promising, especially concerning RevPAR. Year-to-date, we are tracking approximately where we aim to be, although we are slightly behind on food and beverage compared to our targets.

Thank you, everyone, for joining us today. We look forward to seeing many of you over the next few months at the various industry events, and look forward to updating you again next quarter.