NYSE:RLJ RLJ Lodging Trust Q4 2023 Earnings Report $7.09 +0.12 (+1.72%) Closing price 03:59 PM EasternExtended Trading$7.01 -0.08 (-1.14%) As of 04:16 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast RLJ Lodging Trust EPS ResultsActual EPS$0.34Consensus EPS $0.30Beat/MissBeat by +$0.04One Year Ago EPS$0.33RLJ Lodging Trust Revenue ResultsActual Revenue$319.70 millionExpected Revenue$313.34 millionBeat/MissBeat by +$6.36 millionYoY Revenue Growth+5.80%RLJ Lodging Trust Announcement DetailsQuarterQ4 2023Date2/26/2024TimeAfter Market ClosesConference Call DateTuesday, February 27, 2024Conference Call Time10:00AM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Annual Report (10-K)SEC FilingEarnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by RLJ Lodging Trust Q4 2023 Earnings Call TranscriptProvided by QuartrFebruary 27, 2024 ShareLink copied to clipboard.There are 16 speakers on the call. Operator00:00:00Welcome to the Speaker 100:00:00RLJ Lodging Trust Fourth Quarter 2023 Earnings Call. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. I would now like to turn the call over to Nikhil Bhalla, RLJ's Senior Vice President, Finance and Treasurer. Please go ahead. Speaker 200:00:27Thank you, operator. Good morning, and welcome to RLJ Lodging Trust 2023 4th quarter and full year earnings call. On today's call, Leslie Hale, our President and Chief Executive Officer, will discuss key highlights for the quarter Sean Mahoney, our Executive Vice President and Chief Financial Officer, will discuss the company's financial results Tom Bodnant, our Chief Operating Officer will be available for Q and A. Forward looking statements made on this call are subject to numerous risks and uncertainties that may lead the company's actual results to differ materially from what had been communicated. Factors that may impact the results of the company can be found in the company's 10 ks and other reports filed with the SEC. Speaker 200:01:13The company undertakes no obligation to update forward looking statements. Also, as we discuss certain non GAAP measures, it may be helpful to review the reconciliations to GAAP located in our press release. Finally, please refer to the schedule of supplemental information, which was posted to our website last night, which includes pro form a operating results for our current hotel portfolio for 2023. I will now turn the call over to Leslie. Speaker 300:01:42Thanks, Nikhil. Good morning, everyone, and thank you for joining us. We are very pleased with our 4th quarter results, which outperformed the industry for the 4th consecutive quarter, demonstrating our strong growth profile and underscoring our ability to capture emerging demand trends. Our results this quarter exceeded our expectations and capped off a very successful year for RLJ, where we achieved top quartile RevPAR growth of 9%, driven by our urban portfolio and strong performance from our conversions. We exceeded our initial projections for our 2022 conversions, revenue enhancement and margin expansion initiatives. Speaker 300:02:22We made significant progress on our 2nd wave of conversions in Nashville, Houston and New Orleans. We announced 2 more conversions, which included our 2 Pittsburgh assets. We further strengthened our balance sheet while returning capital to our shareholders, and we recently acquired the fee simple interest in our Boston Wyndham asset, pulling forward another growth opportunity. Our strong execution and results this year validate our thoughtful efforts to curate a high quality portfolio with multiple channels of growth, which is giving us the ability to outperform on a relative basis this year and beyond. Now relative to our operating performance for the quarter, our RevPAR grew by 5.2% over the prior year, outperforming the industry by 4x and our competitive set by 2.90 basis points. Speaker 300:03:18Our year over year RevPAR growth accelerated from the 3rd quarter by 180 basis points, benefiting from a balance between occupancy and ADR, demonstrating additional run room and demand and continued pricing power across our portfolio. We are pleased to see this positive momentum carry into January, which achieved close to 6% RevPAR growth. Our urban markets were the underlying driver of our RevPAR growth. These markets continue to benefit from robust group demand, the ongoing improvement in business travel and emerging international inbound demand. Additionally, urban leisure remained healthy as large scale events related to concerts and sports as well as other leisure activity drove strong weekend demand. Speaker 300:04:06These trends were broad based with a number of our urban markets such as Boston, Pittsburgh, Southern California, South Florida and Denver achieving double digit RevPAR growth. The 4th quarter also saw exceptional growth at our 3 conversions in Charleston, Mandalay Beach and Santa Monica. In terms of segmentation, the positive momentum in business travel led our BT revenues to increase to 79% of 2019 levels, a new high watermark and a 400 basis point improvement from the 3rd quarter. Our growth in BT revenues was balanced between 7% growth in room nights and 6% growth in ADR, contributing to our weekday revenues achieving 94% of 2019 levels, which was a 100 basis point sequential improvement from the 3rd quarter. In addition to strong demand from SMEs, we are also seeing continued improvement in production from traditional BT sources such as finance, technology, pharma and aerospace. Speaker 300:05:12Relative to group, demand remains healthy. In addition to strong attendance at citywides, the growth in small self contained group is driving the improvement in this segment, all of which led our 4th quarter group revenues to increase by mid single digits over the prior year. We expect small group demand to remain strong, and our hotels are in the sweet spot to cater to this growing segment given the attractiveness of our meeting space configuration to this segment. Finally, we were encouraged to see healthy leisure trends persist throughout the quarter, especially around holidays, benefiting our resorts, which achieved 6.6% RevPAR growth. With many people settling into a hybrid schedule, weekend demand continued to be strong across our portfolio, especially for urban weekends, which outperformed our portfolio. Speaker 300:06:04The strength across all segments of demand during the Q4, combined with strong growth of 8.1% in our non room revenues, led our total revenues to increase by 5.7%. This strong growth translated into positive year over year EBITDA growth of 2.3%, which speaks to our lean operating model. Turning to capital allocation. Our initial conversions are yielding strong results that are pacing ahead of our expectations. We were pleased to provide updated projections outlining the incremental upside and to showcase the high quality renovations at the Pier site in Santa Monica and Sukari Dunes on Mandalay Beach to many of you recently. Speaker 300:06:44The strong results from these assets bolstered our confidence in the next wave of our conversions. During the year, we initiated the physical conversions in New Orleans and Houston, which will position them for a strong ramp. And we are on track to begin Nashville's renovation later this year. We made great strides towards continuing to unlock incremental embedded growth by announcing that the Renaissance Pittsburgh Hotel will join Marriott's Autograph collection and that the Wyndham Pittsburgh University Center will be converted to a Courtyard by Marriott. Additionally, we executed the optionality that our strong balance sheet provides by returning capital to our shareholders through opportunistically repurchasing $77,000,000 of shares at an attractive price, while doubling our dividend during the year. Speaker 300:07:39The execution of these initiatives has been made possible by the strength of our balance sheet, which also gives us the capacity for external growth. More recently, we acquired the fee simple interest in the 304 Room Boston Wyndham Beacon Hill from the groundlessor. We took advantage of our unique position to secure full ownership in order to unlock another compelling conversion opportunity. We acquired this irreplaceable real estate for $125,000,000 representing $411,000 per key, a meaningful discount to recent hotel trades in Boston. The hotel benefits from an A plus location in Boston's Beacon Hill neighborhood surrounded by Mass General, which is currently undergoing a $1,800,000,000 expansion. Speaker 300:08:32The acquisition will allow us to move forward with executing the same conversion playbook that has been successful for RLJ. This asset is highly attractive to numerous brands given the demand dynamics of the market. Our deep institutional knowledge of the overall market, the hotel's bull's eye location within the submarket and the quality of the asset gives us confidence that upon conversion, there is 40 plus percent upside to the hotel's current EBITDA. We look forward to providing additional details around the conversion of the hotel after we finalize the negotiations with the brand. Overall, we are encouraged by the pipeline of off market external growth opportunities that we are seeing. Speaker 300:09:21The current backdrop of constrained lending provides a significant advantage to all cash buyers like RLJ. That said, we will continue to maintain our discipline as we have demonstrated. As we look ahead to 2024, while economic uncertainty persists, we remain optimistic that industry fundamentals will achieve positive growth this year, especially against the backdrop of minimal new supply. We believe that urban markets will continue outperforming the industry as urban is poised to disproportionately benefit from the strong group trends, the recovery in business transient demand and improving inbound international travel. We also expect more pronounced divergence in individual market performance to emerge given citywide calendars, the location of large leisure oriented events and inbound international travel. Speaker 300:10:18Given our footprint, we should benefit from these trends. We are positioned to outperform this year. There are several key markets, which we expect to be strong this year. Boston should outperform due to a strong citywide calendar. Robust business travel from Boston based industries such as biotech and higher education and Boston's attractive positioning to inbound international travelers. Speaker 300:10:45Southern California should outperform as a result of a strong San Diego citywide calendar, improving business transient from aerospace and a post rider strike backlog of demand from Hollywood related industries and increased inbound international visitation, especially from Asia. New York is expected to benefit from improving travel related to the financial sector, continued strong leisure and increasing inbound international demand during a period of favorable demand supply dynamics. And while we remain sober to Northern California's slow recovery and fewer citywides this year, there are some encouraging green shoots in the market, such as improving perception of San Francisco safety, increasing return to office mandates by tech companies and investors as well as venture capitalists returning to San Francisco due to the concentration of tech talent and AI startups. Additionally, we expect that group will continue to benefit from robust self contained and small group bookings as well as strong citywide calendars in many major U. S. Speaker 300:11:51Markets, supported by our group booking pace being 12% ahead of 2023. And overall leisure travel should remain healthy, led by the strength in urban leisure, which should continue to benefit from hybrid work flexibility and large scale events, including sports, concerts and other activities. Longer term, we are optimistic about the positive trajectory of lodging fundamentals. Our confidence continues to be supported by the ongoing shift of consumer preferences towards experiences, the improvement in business demand, the continued recovery in inbound international travel and the growth of citywide events and attendance. All these positive trends will disproportionately benefit urban markets, especially against the backdrop of an elongated period of limited new supply, allowing these markets to outpace the overall industry growth for several years. Speaker 300:12:49As this new normal takes hold, our portfolio is well positioned to capture growth in all segments of demand. Over the last several years, we have intentionally repositioned our portfolio into prime locations that benefit from 7 day a week demand within urban markets, allowing us to benefit from these emerging trends in addition to growth from our acquisitions and conversions. We believe that all of these tailwinds should allow us to continue to exceed the industry. Our growth profile will be bolstered by our high quality portfolio, which is built to capture the growing live, work, play trends in urban markets the continuing and future upside from our announced conversions the embedded incremental growth from executing on our future pipeline of conversions and ROI opportunities the tailwinds from our recent renovations in South Florida and Southern California, the significant free cash flow generated by our portfolio to self fund growth and the continued optionality created by strong balance sheet, which will allow us to deliver attractive shareholder returns long term. Speaker 400:14:02Overall, I could not be more proud Speaker 300:14:04of the efforts of our entire team, including our operators, whose many contributions have positioned us to drive significant shareholder value over the next several years. Speaker 400:14:16I will now turn the Speaker 300:14:16call over to Sean. Sean? Speaker 500:14:20Thanks, Leslie. To start, our comparable numbers include our 96 hotels owned throughout the Q4. Our reported corporate adjusted EBITDA and FFO include operating results from all sold and acquired hotels during RLJ's ownership period. We were pleased to report strong 4th quarter operating results, which once again demonstrated the runway for growth embedded in our urban centric portfolio. Our 4th quarter RevPAR growth of 5.2% was driven by a 1.5% increase in ADR and a 3.6% increase in occupancy. Speaker 500:14:594th quarter occupancy was 69.3%, which was 92% of 2019 levels. Average daily rate was $193 achieving 107 percent of 2019 and RevPAR was $134 which achieved 99% of 2019, the highest level since the start of the pandemic. In particular, our urban markets outperformed with RevPAR exceeding 2019 levels at 101%, including ADR at 111% of 2019. RevPAR in most of our urban markets exceeded 2022, including Boston at 121%, Los Angeles at 118%, Pittsburgh at 119%, San Francisco at 113%, Denver at 110%, New York at 104% and Washington DC at 105%. Monthly RevPAR growth throughout the Q4 exceeded 2022 for each month. Speaker 500:16:11RevPAR growth was 6.4% in October, 5.6% in November and 3% in December and achieved 101%, 96% 99% of 2019 levels during October, November December respectively. Similar to RevPAR, our monthly total revenue growth above 2022 benefited from continued out of room spend and was 7.6% in October, 5.3% in November and 3.7% in December and achieved 102%, 96% and 100% of 2019 levels during October, November December respectively. We are encouraged by the start of the year where we saw positive momentum in January, which is always a seasonally slower month with RevPAR growth 5.8% above January 2023. January RevPAR was driven by occupancy of 62% and ADR of approximately $191 representing 104% and 102% of January 2023. Turning to the current operating cost environment, recent inflationary pressures continue to normalize during the 4th quarter. Speaker 500:17:35On a per occupied room basis, total hotel operating cost growth was limited to 3.4%, which is 260 basis points lower than the 3rd quarter. Underscoring the benefits of our portfolio construct and our initiatives to redefine our operating cost model, total 4th quarter hotel operating costs were only 4.3% above 2019 levels, meaningfully below the aggregate core CPI growth rate since 2019. Drilling down further into hotel operating expenses, fixed costs such as insurance and property taxes were the most significant driver of the year over year increases in hotel operating expenses, increasing 16% during the Q4. The increases in fixed costs are impacting most industries and are not specific to the lodging industry. We are encouraged by the trends on the more controllable, variable hotel operating costs, which grew 6.6% above 2022 or only 2.8% on a per occupied room basis. Speaker 500:18:43Finally, 4th quarter wages and benefits, our most significant operating costs at approximately 40% of total costs remain generally in line with 2019 levels at 104%. There are many factors that influence these positive results with the most significant contributors being the successful restructuring of many of our 3rd party operating agreements and our lean operating model with 18% fewer FTEs than 2019. Our portfolio remains well positioned and maintain fewer FTEs given our lean operating model, smaller footprints, limited F and B operations and longer lengths of stay. Our 4th quarter operating trends led our portfolio to achieve hotel EBITDA of $89,600,000 and hotel EBITDA margins of 28.1 percent. We were pleased with our operating margin performance, which was only 93 basis points lower than the comparable quarter of 2022 despite continued cost pressures. Speaker 500:19:48Turning to the bottom line, our 4th quarter adjusted EBITDA was $79,200,000 and adjusted FFO per diluted share was $0.34 which came in towards the high end of our guidance. During 2023, we were very active in managing our balance sheet to create additional flexibility and further lower our cost of capital, which included extending $425,000,000 of mortgage debt, recasting our $600,000,000 corporate revolver and entered into a $225,000,000 term loan. The execution of these transaction is a testament to our strong lender relationships and favorable credit profile. We also took advantage of interest rate volatility to proactively manage our interest rate risk by entering into $525,000,000 of new interest rate swaps during the year. Turning to 2024, we will extend our $181,000,000 of mortgage loans and are in the process of refinancing our $200,000,000 secured loan, which is on track to wrap up during the Q2. Speaker 500:20:57Today, our balance sheet is well positioned with an undrawn corporate revolver, our current weighted average maturity is approximately 2.9 years, 81 of our 96 hotels are unencumbered by debt, Our weighted average interest rate is an attractive 4.12% and 89% of debt is either fixed or hedged. As it relates to our liquidity, we ended the quarter with approximately $517,000,000 of unrestricted cash, $600,000,000 of availability on our corporate revolver and $2,200,000,000 of debt. With respect to capital allocation, as Leslie said, we remain committed to returning capital to shareholders through a combination of both share repurchases and dividends. During the Q4, we were active under our $250,000,000 share repurchase program and repurchased approximately 930,000 shares for $9,900,000 at an average price of $10.69 per share. In total during 2023, we repurchased approximately 7,600,000 shares for $77,200,000 at an average price of $10.20 per share. Speaker 500:22:12Additionally, we ended the year with a quarterly common dividend of $0.10 per share, which is well covered and supported by our free cash flow. We will continue making prudent capital allocation decisions to position our portfolio to drive results during the entire lodging cycle, while monitoring the financing markets to identify additional opportunities to improve the laddering of our maturities, reduce our weighted average cost of debt and increase our overall balance sheet flexibility. Turning to our outlook. Based on our current view, we are providing full year 2024 guidance that anticipates a continuation of the current operating and macroeconomic environment. For the full year 2024, we expect comparable RevPAR growth between 2.5% 5.5%, comparable hotel EBITDA between $395,000,000 $425,000,000 corporate adjusted EBITDA between 360,000,000 dollars 390,000,000 and adjusted FFO per diluted share between $1.55 $1.75 Our outlook assumes no additional acquisitions after the Wyndham Boston and no dispositions, refinancings or share repurchases. Speaker 500:23:31We estimate 2024 RLJ capital expenditures will be in the range of $100,000,000 to $120,000,000 and net interest expense will be in the range of $91,000,000 $93,000,000 Our net interest will be above 2023 due to the impact of expiring swaps that had lower interest rates. Speaker 600:23:53With respect Speaker 500:23:53to the cadence for the year, we expect 2024 to follow similar quarterly seasonal patterns as 2023 other than the Q1, which will be impacted by the timing of Easter Finally, please refer to the supplemental information which includes comparable 2023, 2022 and 2019 quarterly and annual operating results for our 90 6 hotel portfolio. Thank you. And this concludes our prepared remarks. We will now open the line for Q and A. Operator? Operator00:24:31Thank you. We will now be conducting a question and answer Our first question comes from the line of Anthony Powell with Barclays. Please proceed with your question. Speaker 700:25:05Hi, good morning. Just a few questions on the Wyndham Beacon Hill deal. Could you maybe talk about multiple or cap rate or any way you can quantify, I guess, the valuation of the transaction? Speaker 400:25:23Let me frame the transaction and I will answer your question. I think that through our leasehold, we had the right to the cash flows for the next four and a half years. This transaction gave us the ability to buy the asset fee simple and have the rights to the cash flows forever. We took advantage of our unique position as leaseholder to have a competitive advantage. We use that competitive advantage and the current backdrop to give us ability to buy the asset at a very attractive level. Speaker 400:26:00Most recent transaction that happened at the Whitney was only 4 blocks away from our asset, it traded for 875,000 a key. We believe the value that we bought this at is at a significant discount to what we would have had to pay at the end of our lease. I mean keep in mind that this is bull's eye real estate. It's got significant FAR. It's scarcity of land value in Boston and we would have had no leverage and we would have been competing against not only hotel years, but we will also competing against alternative use and clearly Mass General who has 1,000,000,000 of dollars deployed towards strategic acquisitions. Speaker 400:26:41And so we believe that getting access to the upside of this asset earlier, getting a discount to what we would have had to compete for at the end of our lease more than offsets any remaining cash flow that we would have had in our lease term. And it allows us to unlock another compelling value creation opportunity and which we believe has 40 plus percent upside to the current EBITDA and from our perspective, we underwrote this to stabilize at 8.5 a multiple on a purchase price. And if you add in the CapEx based on the brands that we're looking at, it's another turn to turn and a half. Speaker 700:27:22Okay. So 9% to 9.5% I guess stabilized after CapEx. Is that the way to think about it? Speaker 400:27:28Yes, roughly. Speaker 700:27:30Okay. All right. And just maybe one more in terms of leisure trends. When you combine your weekend leisure plus your resort demand, it seems like you guys are doing pretty well in leisure generally. So maybe talk about how leisure as a whole is looking through this year? Speaker 700:27:47How did it trend in the back half of last year? And do you see a stabilization and improvement happening in that part of the business? Speaker 400:27:53Yes, I mean our general perspective is that leisure remains healthy. Our total revenues were up 4.3% year over year in the Q4 and that was room night driven. If we look at our just our weekends, our weekends were up 4.4% year over year and that was driven by 2 thirds demand as well. Urban weekends continued to be strong. We're about 114 percent of 2019 levels on urban weekends and that's 200 basis points ahead of where our overall portfolio is at. Speaker 400:28:24As you mentioned, our results were strong in the 4th quarter, up 6.6% and it's benefiting obviously from our conversions. But we saw strength in South Florida which was up 10% in Q4, Southern California was up. It's also we're clearly benefiting from the continued flexibility that work life live environment provides us. I would also say that as we look forward into the year, we expect leisure to remain strong and to be balanced between rate and Oc and urban leisure is going to drive that for us. Speaker 700:28:58Okay. Thank you. Operator00:29:02Our next question comes from the line of Gregory Miller with Truist. Please proceed with your Speaker 800:29:10I'd like to start off with the Marriott in Louisville. Could you share your thoughts about that property's the expectations for you all for 24 in that property, maybe about group pace or overall growth expectations relative to the full portfolio guidance? Thanks. Speaker 600:29:28Yes. Good morning, Greg. What I would say is Marriott Louisville not only is coming off of a good year this year because in 2023 it had about a 22% RevPAR growth. And the great thing about that RevPAR growth almost all of it came in ADR compared to 2019. And when we look into 2024, we're also very encouraged, your question about group pace, we're at 107% and as you know our location is connected to the convention center, so we're in position A. Speaker 600:30:00And a couple of things that I would also add, this year we had a couple of special events. It's the 150th year of Kentucky Derby will be celebrated. And one of the 4 major golf tournaments, the PGA tournament will be in Valhalla this year. So we get some benefits from that. And lastly, as Leslie mentioned, Urban Leisure, the Bourbon Trail is just another type of example of enjoying the venues that are driving that type of demand in an urban environment like that. Speaker 400:30:29And I would just sort of add just in general that our portfolio diversification is going to be really strong this year. We mentioned in our prepared remarks that Boston, New York and Southern California are going to be strong, but we also see strength in Atlanta, Louisville in terms of what Tom talked about, Denver, Pittsburgh and Orlando as well. So diversification is obviously benefiting our portfolio. Speaker 800:30:51All right, thanks. And then for the follow-up question, I'd like to ask about the transactions environment today. Your current expectations for upscale, chain scale transactions this year, perhaps coming out of the Alice conference? Do you anticipate that there's going to be a pickup in activity in the back half of this year? Or at this stage, do you think some of the hype is likely to be unrealized? Speaker 400:31:18No, look, I think as we sit here today, transaction volume continues to be constrained, but we do have an expectation like the broader market that transactions will improve, the volume will improve in the back half of the year, given the expectations around interest rates coming down. And that optimism has sort of flushed itself out through increased conversations in general, more previews of assets that Alice, which you just mentioned, BOBs are being done. And I think in general, because the concept of recession is generally off the table, sellers have been able to and people have been able to sort of underwrite a little bit more clarity. And so as a result, while the bid ask hasn't closed it's gotten a little bit closer and that makes things more actionable and we also think that creates a very attractive environment for all cash buyers at least for the next couple of quarters until interest rates come down. And longer it takes for interest rates to come down, that window for all cash buyers is elongated from that perspective. Speaker 400:32:16And what we're seeing from our perspective is that our team is actively underwriting, our pipeline is largely focused on unique situations that benefit all cash buyers. It could be related to the fact that a seller has a maturity, it could be related to fatigue by an equity partner or incremental capital that needs to be put in if the buyer doesn't want to put in. And so, we see things that are materializing today as a result of the current backdrop. Speaker 800:32:46Thanks. I appreciate it, Leslie. Operator00:32:50Our next question comes from the line of Michael Bellisario Speaker 900:33:011st question on guidance, maybe big picture, how are you thinking about the split between rate and occupancy growth in 2024? And then if my math is correct, it looks like expenses are maybe up 5.5% at the midpoint. Maybe help us understand what the building blocks are to get to that 5.5% number? Thanks. Speaker 400:33:20Yes, Mike, our perspective is that our growth is going to be split 2 thirds demand and 1 third rate. And if you sort of think about how our portfolio is indexed, we're indexed to urban, urban's indexed to BT and BT is still our BT revenues were only at 73% of 2019 levels and so there's room for growth both from a demand and occupancy perspective and so that's how we sort of thought about it. Speaker 500:33:51And Mike on the operating expenses, you're correct that the midpoint of guidance assumes sort of mid-five percent increases year over year. The cadence of that or the split of that rather is we expect the pressures around fixed costs to continue throughout 2024. And so that's really primarily driven by insurance and property taxes. So we would expect those fixed costs to be up in the low double digits again next year on the operating costs. I think on the variable costs, we'd expect them to be roughly 100 basis points lower growth rate than the overall operating costs driven by on a per occupied room basis, we expect our cost to only be up about 2% year over year. Speaker 500:34:45And so we think net net the operating cost environment, it improved throughout 2023 and we expect that improvement to continue into 2024 as the inflationary pressures are in a rearview mirror. Speaker 900:35:00Thanks. That's helpful. And then just one follow-up, just on Boston, could you provide what the hotel level EBITDA was in 2023? And how much was the ground rent expense, I. E. Speaker 900:35:09What's going away in 2024? And then any initial thoughts on San Diego given that that lease expires in 2019? Thanks. Speaker 500:35:18I'll start with some of the stats and then pass it over to Leslie to talk about San Diego. The hotel did roughly $10,500,000 of EBITDA in 2023 and the ground lease expense in 2023 was roughly $0.75 Speaker 400:35:39And then Mike, as it relates to San Diego, we're in active negotiations with the Port of San Diego to extend the lease. We feel very good about where we are in our discussions and we are a tenant that's in good standing and so we see a path forward in terms of extending the lease. Speaker 900:36:00Helpful. Thank you. Operator00:36:04Our next question comes from the line of Dorey Kaston with Wells Fargo. Please proceed with your question. Speaker 1000:36:11Thanks. Good morning. As you think through the phasing of your conversions, renovations over the next few years, should we assume that the upside is completed work fully offsets, I guess, ongoing renovation headwinds or are there certain projects that stick out as being particularly disruptive? Speaker 500:36:31Yes, Dory. So from a renovation displacement both because conversions are just a subset of our renovation dollars. We don't expect either a headwind or tailwind over the next several years related to renovations. And that's really a byproduct of us having an in house design and construction team that's able to sequence the rooms out of service on the conversions and renovations to minimize the time out of service and also have a scope that gets hotels back up and running as quick as possible. And so renovation disruption for us is not going to be either a headwind or tailwind for this year or for the next several years. Speaker 500:37:15From a ramp up perspective, you're correct. What we said is that we're going to launch a couple of conversions per year and we're sequencing that in a way that would allow us to have outsized growth in each one of those years. Generally speaking on our conversions, we underwrite a ramp of 2 to 3 years. If it's more leisure centric, we generally believe that that ramp can be in the 2 year versus the 3 year perspective, but that's our general assumptions. And then all of that when you put it all together is was baked into the bridges that we provided as part of our Santa Monica deck, and we provided how we expected the EBITDA for the conversions to ramp over the next 3 years. Speaker 1000:38:02And Sean, while I have you, you said that the expiration of swaps was the headwind in your 2024 FFO guide. Can you provide us with your view on your fixed versus floating exposure as we look out of the next year? Speaker 500:38:17Sure. So we ended the year with a little under 90% of our debt that was either fixed or hedged. Our long term strategy is to have anywhere from 20% to 30% of our debt as floating as a hedge against a downturn. If we did nothing else, we would end 2024 with a little under 30% of our debt floating. Now we were active in 2023 and managing it again in 2024, but we entered into $525,000,000 of swaps in 2023 at an average rate of roughly 3.5%. Speaker 500:38:58And so you'd expect us to continue to actively managing it. But generally speaking, that 20% to 30% floating is what we target for our long term. Speaker 1000:39:09Okay. And then just last, should we expect your dividend payout as a percentage of FFO per share to look more like 2019 by 2025? Just trying to get a sense of where your NOLs are, and how you might use those over the medium term? Speaker 500:39:26Yes. So we have several years of NOLs remaining. And so really our dividend policy is going to be based on what we think an appropriate payout ratio is. I think the way we're thinking about the payout ratio sort of I'll call it normalized in this environment is going to be less than it was in 2019 for all lodging REITs. And so our payout ratio today as FFO is in the mid-30s. Speaker 500:39:54We think our current payout ratio has room for increases over both this year and over the next couple of years. We think a normalized payout ratio is somewhere in the 60% to 65% of FFO at sort of the peak of this cycle. And you would expect us to be measured in how we increase that throughout the cycle. But the NOLs provide us, the flexibility to do that based on what we think is appropriate for the market. Speaker 100:40:27Okay. Thank you. Operator00:40:31The next question comes from the line of Tyler Batory with Oppenheimer. Please proceed with your question. Speaker 1100:40:37Good morning. Thank you. Speaker 200:40:39Can you please talk Speaker 1100:40:39through your industry RevPAR assumption that's implied in your guidance this year? Just trying to get a sense of what sort of outperformance you expect from your portfolio, versus the broader logic space? Speaker 400:40:56So I mean, look, our the baseline for our assumption is that our portfolio should perform in line with urban which is projected to be 3.8. And so clearly our midpoint of our guidance lines up with that. We expect Urban to outperform the industry. If you look at Q4 Urban outperformed the industry by 4 times. If you look at the full year Urban outperformed the industry by 2x. Speaker 1100:41:23Okay, perfect. And then, Marcos specific, can you talk through a little bit more, get some more color on what you're seeing in San Francisco, DVD and also talk about Silicon Valley as well please? Speaker 400:41:36Yes, I would say that overall keep in mind that we have a diversified footprint and we only have a few assets in the CBD. In the Q4, our CBD benefited from the citywides and also some self contained. Our Silicon Valley in the 4th quarter saw just weak transient and I think that was reflected in the numbers that we put on our supplement. Speaker 300:42:02As we look forward, Speaker 400:42:05San Francisco we acknowledge as we said in our prepared remarks is going to have a soft citywide, but we are seeing improvement in BT coming this year particularly as return to office increases and as the activity around AI continues to increase as well. But I would say that generally Tyler that if you look at the headline risk that San Francisco had, it's continuing to subside. The headlines recently have been very positive around the amount of leasing that's going on in the market as well as what's happening from an AI perspective. The city has done a great job from a standpoint of addressing safety. They had some successes with APAC last quarter and so we continue to see the groundwork being laid for San Francisco to recover. Speaker 1100:42:57Okay. And then how about Silicon Valley? Any commentary there? I mean, it's probably similar to what you just articulated in terms of San Francisco? Speaker 600:43:06Sure. I'll add a little color on that too. So in Silicon Valley, it's important that we have international deployment. When we think about what's happening in forward booking from China as well as project business that comes there. It was encouraging to see in September, October, November that we're starting to get closer to about 95% of deployment from an international standpoint. Speaker 600:43:30And forward booking for China, it's supposed to be 3 times more than it was in 2023. So that's encouraging. What I would say is we have a lot of extended stay hotels in Silicon Valley and we have one that's under renovation. There we're prepared the summertime of 2024. And we're encouraged based on some of the back to office that we were talking about for tech and some of the businesses are kind of congregating and moving towards having more demand. Speaker 600:44:00We saw already in Q1 a little bit more demand than we did in Q4. So that was encouraging as we come out of the gate in 2020 Speaker 1100:44:094. Okay, great. That's all for me. Thank you for the detail. Operator00:44:14Our next question comes from the line of Chris Darling with Green Street Advisors. Please proceed with your question. Speaker 1200:44:21Thank you. Good morning. Leslie, going back to your comments around the transaction market, how are you thinking about incremental asset sales in light of the implied EBITDA multiple at which you trade relative to private hotel pricing? Speaker 400:44:37So, Chris, I would say that look, I think you should expect us to be active portfolio managers. As the industry and market dynamics unfold, we're evaluating the impact on our portfolio. As a new normal takes hold, we'll look at our views on current markets and how they evolve. We don't have to sell assets because given our balance sheet, but we can be opportunistic and so as we think about the growth rates in certain markets and how that profile compares to our overall portfolio or the capital needs and an asset needs relative to the returns it can generate, we'll look to recycle assets along that way. But I think from our perspective, it's an asset by asset kind of perspective. Speaker 1200:45:19All right. Appreciate those thoughts. And then maybe just following up on the comments you just provided around the Bay Area. If I look at the overall portfolio, I see that 2023 EBITDA margins finished about 300 basis points below comparable 2019 levels. I'm curious what that would look like if you excluded the Bay Area, just trying to get a sense of what the upside might be as that region continues to ramp? Speaker 500:45:48Yes, Chris. So without the Bay Area, that is the primary driver of our sort of where our EBITDA is relative to 2019. From a margin perspective, the lion's share of it comes from Northern California. So if you exclude Northern California from our portfolio, the margins are much closer, if not right on top of 2019. But we as Leslie mentioned, our view around the green shoots in Northern California gives us some encouragement going forward. Speaker 500:46:23But when you look at the delta to 2019, Northern California is driving that gap. Speaker 1200:46:30All right. That's helpful. That's all for me. Thank you. Operator00:46:36Our next question comes from the line of Austin Wurschmidt with KeyBanc. Please proceed with your question. Speaker 1300:46:42Great. Thanks. Good morning, everybody. Just going back to the transaction theme. Leslie, I think you discussed looking for unique opportunities that benefit all cash buyers. Speaker 1300:46:51I guess how much additional dry powder do you have before you'd need to match fund any capital outlays with either dispositions or some other capital raise? Speaker 400:47:04Yes. Listen, I don't have a good number for you. But what I would say is, is that we feel good about in our pipeline relative to where our current balance sheet sits. Speaker 500:47:13Yes. And I'll just add on, right, we're sitting at year end with a little over $500,000,000 of corporate cash. We used $125,000,000 of that for Boston. And so pro form a, that's $375,000,000 of cash. Our portfolio generates roughly 25% of our EBITDA turns into free cash flow on an annual basis, right? Speaker 500:47:37So on average, that's north of $100,000,000 of incremental free cash flow generated by portfolio, which obviously creates incremental capacity as well. But I think we've got, I think the takeaway is that with our existing balance sheet and our free cash flow, we have the flexibility for incremental deals without having to go anywhere near the markets unless it's favorable to do so. Speaker 1300:48:03And then of that free cash flow that you just highlighted, I guess how much of that goes towards some of the renovation spend that you're doing and how much is sort of freed up to share buybacks, acquisitions and other sort of capital allocation opportunities? Speaker 500:48:19That percentage in those numbers are after everything, including assumption on dividends as well as CapEx. Speaker 1300:48:27That's helpful. And then on the renovation side, I guess, how soon could you commence the renovation at the Boston Wyndham? And do you have a sense today of the capital spend necessary to achieve that 40% upside to hotel EBITDA that you highlighted? Speaker 400:48:44Yes, I mean, we're still negotiating with the brands, Austin. So that number is sort of a range that we're working through. I would say in terms of timing, our objective is to have the ask completed before World Cup, which was mid-twenty 26. Speaker 1300:49:02Very helpful. Thank you. Operator00:49:07Our next question comes from the line of Florus Van Dykem with Compass Point. Please proceed with your question. Speaker 1400:49:15Hey, thanks for taking my question. So let me flip it on its head. I know there are a couple of questions here on Northern California, but I still see a 40 $6,000,000 delta relative to 2019 levels. Can you maybe comment on the markets that are the highest in terms of exceeding 2019 levels of EBITDA? And how much more can you push you think your urban markets in 24? Speaker 1400:49:55Is that growth going to that you're expecting, is that coming from other markets besides Northern California? Do you see a steady progress in all of your markets in 2024? Speaker 200:50:10Yes, of course, as Speaker 400:50:10I mentioned before, our performance this year has been driven broad based. We talked about in our prepared remarks that Boston is strong given its citywide base and self contained. It also has a strong base of BT. New York, we talked about leisure remaining strong and ramping as well as limited new supply. Atlanta is going to benefit from the backlog in the rider strike. Speaker 400:50:36Southern California is going to benefit from San Diego citywide as well as strong economic base and given the industries that it caters to. Louisville, we talked about being strong as well. Denver, which has got good corporate base. Pittsburgh as well, Orlando. The diversification in our portfolio is more than enough to offset the slower ramp in that we're seeing in San Francisco. Speaker 500:51:03Yes. And what I'll add to that Lars is we put out an EBITDA bridge as part of our materials in Santa Monica and Boston, right. That EBITDA bridge was for the next several years and got us to north of $500,000,000 of EBITDA relative to the I'm using round numbers, but roughly $450,000,000 in 2019. And so we wouldn't have put that data point out had we not had confidence in the ability of the portfolio to get ahead of that. And what's driving that is obviously Urban has been driving it to date. Speaker 500:51:37We believe the conversions and the incremental EBITDA associated with Operator00:51:39those ROI initiatives are driving that. But you have a Speaker 500:51:40portfolio for a reason to Leslie's we have confidence that we will go through 2019 over the next several years. Speaker 1400:51:57Thanks. Maybe a follow-up question on San Diego. Presumably, you will not be able to buy the Freehold in San Diego. It's just an extension of the lease. So can we assume some sort of similar type of cost going forward on that? Speaker 1400:52:15Or is there going to be a greater profit share that you're going to have to give away to the city or the, I guess, whatever local municipality that owns the freehold on that property? Speaker 400:52:28Hey, Florence, I appreciate the question, but we're in confidential negotiation, so I can't comment on your question. Speaker 1400:52:36Fair enough. Maybe one additional follow-up then. For Sean, your weighted average term of your debt is relatively short at 2.9 years today. Are you waiting for rates to come down? And will you be looking to extend the maturity on your debts when that does occur? Speaker 1400:53:01Or how are you thinking about the balance sheet and the term of your debt going forward? Speaker 500:53:08Yes. Listen, as a general rule, we always want to get ahead of our debt maturities. And we have, a little under $400,000,000 of maturities in the next quarter. We are in the process of extending $181,000,000 of that, which is represented by 2 loans. And so we have extension rights under those loan agreements just for probably those the combined debt yield of those two loans is 14.5 times, right? Speaker 500:53:42So let's say these are low levered, well covered loans. We have the contract right and so we're just working with the lender right now to extend that. We will get that done shortly. And then the other is a $200,000,000 loan that we are in the process of refinancing and we've got multiple options on that loan, which will add tenure as well. So we've got great lender relationships. Speaker 500:54:06We've shown the ability to extend the debt, but those will then when we take care of that in very short order obviously, we'll have an impact of roughly half a year on the weighted average maturity. Speaker 1400:54:22Thanks. That's it for me. Operator00:54:25Our next question comes from the line of Bill Crow with Raymond James. Please proceed with your question. Speaker 1500:54:31Hey, good morning. I'm just curious, Leslie, at Alice, one of the main discussion points was all the deferred CapEx out there. And it's not really a big issue for the REITs except for the fact that it kind of damages brand reputation. I wanted to get your perspective on whether the brands are doing enough, have enough discipline on the owners, non REIT owners, or whether we should really be concerned about the destruction of brand value? Speaker 400:55:05Bill, thanks for the question. I think the brands have been good partners for owners through COVID creating opportunities for people to manage through that. And they have been consistently stair stepping back into capital programs and adjusting those in waves and they now have pushed back to more traditional levels of requiring PIPs to be executed in addition to putting programs in place. I hesitate to say penalties, but programs in place to ensure that those get executed. But I would also say is that owning hotels is ecosystem and to the extent that an owner has pressure from that, that will have create a catalyst for trading the asset and that capital will get put in. Speaker 400:55:56So the brands are as transactions occur being very rigid around ensuring that those that the capital plans get executed. So I would say that, yes, there's somewhat of a backlog. I don't believe it's damaging the brand And I believe that what the brands are doing to ensure that the plans get done will cleanse the entire ecosystem. Speaker 200:56:18Okay. That's it for me. Thank you. Operator00:56:21Thank you. Ms. Hale, we have no further questions at this time. I would now like to turn the floor back over to you for closing comments. Speaker 400:56:29Thank you everybody for joining us. The strong results that we've shown and we expect to continue are the direct results of what we've been executing around curating a portfolio that benefits from 7 day a week demand in key urban markets. We look forward to providing you additional updates as we progress throughout the year. Thank you again for joining us. Operator00:56:49Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallRLJ Lodging Trust Q4 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Annual report(10-K) RLJ Lodging Trust Earnings HeadlinesEarnings call transcript: RLJ Lodging Trust Q1 2025 shows mixed resultsMay 6 at 11:44 PM | uk.investing.comQ1 2025 RLJ Lodging Trust Earnings CallMay 6 at 11:44 PM | finance.yahoo.comURGENT: Someone's Moving Gold Out of London...People who don’t understand the gold market are about to lose a lot of money. Unfortunately, most so-called “gold analysts” have it all wrong… They tell you to invest in gold ETFs - because the popular mining ETFs will someday catch fire and close the price gap with spot gold. May 7, 2025 | Golden Portfolio (Ad)RLJ Lodging Trust Reports First Quarter 2025 ResultsMay 6 at 11:44 PM | seekingalpha.comRLJ Lodging Trust: Guidance Cut Is Already Priced InMay 6 at 1:52 PM | seekingalpha.comRLJ Lodging Trust (NYSE:RLJ) Q1 2025 Earnings Call TranscriptMay 6 at 9:12 AM | insidermonkey.comSee More RLJ Lodging Trust Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like RLJ Lodging Trust? Sign up for Earnings360's daily newsletter to receive timely earnings updates on RLJ Lodging Trust and other key companies, straight to your email. Email Address About RLJ Lodging TrustRLJ Lodging Trust (NYSE:RLJ) is a self-advised, publicly traded real estate investment trust that owns primarily premium-branded, high-margin, focused-service and compact full-service hotels. 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There are 16 speakers on the call. Operator00:00:00Welcome to the Speaker 100:00:00RLJ Lodging Trust Fourth Quarter 2023 Earnings Call. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. I would now like to turn the call over to Nikhil Bhalla, RLJ's Senior Vice President, Finance and Treasurer. Please go ahead. Speaker 200:00:27Thank you, operator. Good morning, and welcome to RLJ Lodging Trust 2023 4th quarter and full year earnings call. On today's call, Leslie Hale, our President and Chief Executive Officer, will discuss key highlights for the quarter Sean Mahoney, our Executive Vice President and Chief Financial Officer, will discuss the company's financial results Tom Bodnant, our Chief Operating Officer will be available for Q and A. Forward looking statements made on this call are subject to numerous risks and uncertainties that may lead the company's actual results to differ materially from what had been communicated. Factors that may impact the results of the company can be found in the company's 10 ks and other reports filed with the SEC. Speaker 200:01:13The company undertakes no obligation to update forward looking statements. Also, as we discuss certain non GAAP measures, it may be helpful to review the reconciliations to GAAP located in our press release. Finally, please refer to the schedule of supplemental information, which was posted to our website last night, which includes pro form a operating results for our current hotel portfolio for 2023. I will now turn the call over to Leslie. Speaker 300:01:42Thanks, Nikhil. Good morning, everyone, and thank you for joining us. We are very pleased with our 4th quarter results, which outperformed the industry for the 4th consecutive quarter, demonstrating our strong growth profile and underscoring our ability to capture emerging demand trends. Our results this quarter exceeded our expectations and capped off a very successful year for RLJ, where we achieved top quartile RevPAR growth of 9%, driven by our urban portfolio and strong performance from our conversions. We exceeded our initial projections for our 2022 conversions, revenue enhancement and margin expansion initiatives. Speaker 300:02:22We made significant progress on our 2nd wave of conversions in Nashville, Houston and New Orleans. We announced 2 more conversions, which included our 2 Pittsburgh assets. We further strengthened our balance sheet while returning capital to our shareholders, and we recently acquired the fee simple interest in our Boston Wyndham asset, pulling forward another growth opportunity. Our strong execution and results this year validate our thoughtful efforts to curate a high quality portfolio with multiple channels of growth, which is giving us the ability to outperform on a relative basis this year and beyond. Now relative to our operating performance for the quarter, our RevPAR grew by 5.2% over the prior year, outperforming the industry by 4x and our competitive set by 2.90 basis points. Speaker 300:03:18Our year over year RevPAR growth accelerated from the 3rd quarter by 180 basis points, benefiting from a balance between occupancy and ADR, demonstrating additional run room and demand and continued pricing power across our portfolio. We are pleased to see this positive momentum carry into January, which achieved close to 6% RevPAR growth. Our urban markets were the underlying driver of our RevPAR growth. These markets continue to benefit from robust group demand, the ongoing improvement in business travel and emerging international inbound demand. Additionally, urban leisure remained healthy as large scale events related to concerts and sports as well as other leisure activity drove strong weekend demand. Speaker 300:04:06These trends were broad based with a number of our urban markets such as Boston, Pittsburgh, Southern California, South Florida and Denver achieving double digit RevPAR growth. The 4th quarter also saw exceptional growth at our 3 conversions in Charleston, Mandalay Beach and Santa Monica. In terms of segmentation, the positive momentum in business travel led our BT revenues to increase to 79% of 2019 levels, a new high watermark and a 400 basis point improvement from the 3rd quarter. Our growth in BT revenues was balanced between 7% growth in room nights and 6% growth in ADR, contributing to our weekday revenues achieving 94% of 2019 levels, which was a 100 basis point sequential improvement from the 3rd quarter. In addition to strong demand from SMEs, we are also seeing continued improvement in production from traditional BT sources such as finance, technology, pharma and aerospace. Speaker 300:05:12Relative to group, demand remains healthy. In addition to strong attendance at citywides, the growth in small self contained group is driving the improvement in this segment, all of which led our 4th quarter group revenues to increase by mid single digits over the prior year. We expect small group demand to remain strong, and our hotels are in the sweet spot to cater to this growing segment given the attractiveness of our meeting space configuration to this segment. Finally, we were encouraged to see healthy leisure trends persist throughout the quarter, especially around holidays, benefiting our resorts, which achieved 6.6% RevPAR growth. With many people settling into a hybrid schedule, weekend demand continued to be strong across our portfolio, especially for urban weekends, which outperformed our portfolio. Speaker 300:06:04The strength across all segments of demand during the Q4, combined with strong growth of 8.1% in our non room revenues, led our total revenues to increase by 5.7%. This strong growth translated into positive year over year EBITDA growth of 2.3%, which speaks to our lean operating model. Turning to capital allocation. Our initial conversions are yielding strong results that are pacing ahead of our expectations. We were pleased to provide updated projections outlining the incremental upside and to showcase the high quality renovations at the Pier site in Santa Monica and Sukari Dunes on Mandalay Beach to many of you recently. Speaker 300:06:44The strong results from these assets bolstered our confidence in the next wave of our conversions. During the year, we initiated the physical conversions in New Orleans and Houston, which will position them for a strong ramp. And we are on track to begin Nashville's renovation later this year. We made great strides towards continuing to unlock incremental embedded growth by announcing that the Renaissance Pittsburgh Hotel will join Marriott's Autograph collection and that the Wyndham Pittsburgh University Center will be converted to a Courtyard by Marriott. Additionally, we executed the optionality that our strong balance sheet provides by returning capital to our shareholders through opportunistically repurchasing $77,000,000 of shares at an attractive price, while doubling our dividend during the year. Speaker 300:07:39The execution of these initiatives has been made possible by the strength of our balance sheet, which also gives us the capacity for external growth. More recently, we acquired the fee simple interest in the 304 Room Boston Wyndham Beacon Hill from the groundlessor. We took advantage of our unique position to secure full ownership in order to unlock another compelling conversion opportunity. We acquired this irreplaceable real estate for $125,000,000 representing $411,000 per key, a meaningful discount to recent hotel trades in Boston. The hotel benefits from an A plus location in Boston's Beacon Hill neighborhood surrounded by Mass General, which is currently undergoing a $1,800,000,000 expansion. Speaker 300:08:32The acquisition will allow us to move forward with executing the same conversion playbook that has been successful for RLJ. This asset is highly attractive to numerous brands given the demand dynamics of the market. Our deep institutional knowledge of the overall market, the hotel's bull's eye location within the submarket and the quality of the asset gives us confidence that upon conversion, there is 40 plus percent upside to the hotel's current EBITDA. We look forward to providing additional details around the conversion of the hotel after we finalize the negotiations with the brand. Overall, we are encouraged by the pipeline of off market external growth opportunities that we are seeing. Speaker 300:09:21The current backdrop of constrained lending provides a significant advantage to all cash buyers like RLJ. That said, we will continue to maintain our discipline as we have demonstrated. As we look ahead to 2024, while economic uncertainty persists, we remain optimistic that industry fundamentals will achieve positive growth this year, especially against the backdrop of minimal new supply. We believe that urban markets will continue outperforming the industry as urban is poised to disproportionately benefit from the strong group trends, the recovery in business transient demand and improving inbound international travel. We also expect more pronounced divergence in individual market performance to emerge given citywide calendars, the location of large leisure oriented events and inbound international travel. Speaker 300:10:18Given our footprint, we should benefit from these trends. We are positioned to outperform this year. There are several key markets, which we expect to be strong this year. Boston should outperform due to a strong citywide calendar. Robust business travel from Boston based industries such as biotech and higher education and Boston's attractive positioning to inbound international travelers. Speaker 300:10:45Southern California should outperform as a result of a strong San Diego citywide calendar, improving business transient from aerospace and a post rider strike backlog of demand from Hollywood related industries and increased inbound international visitation, especially from Asia. New York is expected to benefit from improving travel related to the financial sector, continued strong leisure and increasing inbound international demand during a period of favorable demand supply dynamics. And while we remain sober to Northern California's slow recovery and fewer citywides this year, there are some encouraging green shoots in the market, such as improving perception of San Francisco safety, increasing return to office mandates by tech companies and investors as well as venture capitalists returning to San Francisco due to the concentration of tech talent and AI startups. Additionally, we expect that group will continue to benefit from robust self contained and small group bookings as well as strong citywide calendars in many major U. S. Speaker 300:11:51Markets, supported by our group booking pace being 12% ahead of 2023. And overall leisure travel should remain healthy, led by the strength in urban leisure, which should continue to benefit from hybrid work flexibility and large scale events, including sports, concerts and other activities. Longer term, we are optimistic about the positive trajectory of lodging fundamentals. Our confidence continues to be supported by the ongoing shift of consumer preferences towards experiences, the improvement in business demand, the continued recovery in inbound international travel and the growth of citywide events and attendance. All these positive trends will disproportionately benefit urban markets, especially against the backdrop of an elongated period of limited new supply, allowing these markets to outpace the overall industry growth for several years. Speaker 300:12:49As this new normal takes hold, our portfolio is well positioned to capture growth in all segments of demand. Over the last several years, we have intentionally repositioned our portfolio into prime locations that benefit from 7 day a week demand within urban markets, allowing us to benefit from these emerging trends in addition to growth from our acquisitions and conversions. We believe that all of these tailwinds should allow us to continue to exceed the industry. Our growth profile will be bolstered by our high quality portfolio, which is built to capture the growing live, work, play trends in urban markets the continuing and future upside from our announced conversions the embedded incremental growth from executing on our future pipeline of conversions and ROI opportunities the tailwinds from our recent renovations in South Florida and Southern California, the significant free cash flow generated by our portfolio to self fund growth and the continued optionality created by strong balance sheet, which will allow us to deliver attractive shareholder returns long term. Speaker 400:14:02Overall, I could not be more proud Speaker 300:14:04of the efforts of our entire team, including our operators, whose many contributions have positioned us to drive significant shareholder value over the next several years. Speaker 400:14:16I will now turn the Speaker 300:14:16call over to Sean. Sean? Speaker 500:14:20Thanks, Leslie. To start, our comparable numbers include our 96 hotels owned throughout the Q4. Our reported corporate adjusted EBITDA and FFO include operating results from all sold and acquired hotels during RLJ's ownership period. We were pleased to report strong 4th quarter operating results, which once again demonstrated the runway for growth embedded in our urban centric portfolio. Our 4th quarter RevPAR growth of 5.2% was driven by a 1.5% increase in ADR and a 3.6% increase in occupancy. Speaker 500:14:594th quarter occupancy was 69.3%, which was 92% of 2019 levels. Average daily rate was $193 achieving 107 percent of 2019 and RevPAR was $134 which achieved 99% of 2019, the highest level since the start of the pandemic. In particular, our urban markets outperformed with RevPAR exceeding 2019 levels at 101%, including ADR at 111% of 2019. RevPAR in most of our urban markets exceeded 2022, including Boston at 121%, Los Angeles at 118%, Pittsburgh at 119%, San Francisco at 113%, Denver at 110%, New York at 104% and Washington DC at 105%. Monthly RevPAR growth throughout the Q4 exceeded 2022 for each month. Speaker 500:16:11RevPAR growth was 6.4% in October, 5.6% in November and 3% in December and achieved 101%, 96% 99% of 2019 levels during October, November December respectively. Similar to RevPAR, our monthly total revenue growth above 2022 benefited from continued out of room spend and was 7.6% in October, 5.3% in November and 3.7% in December and achieved 102%, 96% and 100% of 2019 levels during October, November December respectively. We are encouraged by the start of the year where we saw positive momentum in January, which is always a seasonally slower month with RevPAR growth 5.8% above January 2023. January RevPAR was driven by occupancy of 62% and ADR of approximately $191 representing 104% and 102% of January 2023. Turning to the current operating cost environment, recent inflationary pressures continue to normalize during the 4th quarter. Speaker 500:17:35On a per occupied room basis, total hotel operating cost growth was limited to 3.4%, which is 260 basis points lower than the 3rd quarter. Underscoring the benefits of our portfolio construct and our initiatives to redefine our operating cost model, total 4th quarter hotel operating costs were only 4.3% above 2019 levels, meaningfully below the aggregate core CPI growth rate since 2019. Drilling down further into hotel operating expenses, fixed costs such as insurance and property taxes were the most significant driver of the year over year increases in hotel operating expenses, increasing 16% during the Q4. The increases in fixed costs are impacting most industries and are not specific to the lodging industry. We are encouraged by the trends on the more controllable, variable hotel operating costs, which grew 6.6% above 2022 or only 2.8% on a per occupied room basis. Speaker 500:18:43Finally, 4th quarter wages and benefits, our most significant operating costs at approximately 40% of total costs remain generally in line with 2019 levels at 104%. There are many factors that influence these positive results with the most significant contributors being the successful restructuring of many of our 3rd party operating agreements and our lean operating model with 18% fewer FTEs than 2019. Our portfolio remains well positioned and maintain fewer FTEs given our lean operating model, smaller footprints, limited F and B operations and longer lengths of stay. Our 4th quarter operating trends led our portfolio to achieve hotel EBITDA of $89,600,000 and hotel EBITDA margins of 28.1 percent. We were pleased with our operating margin performance, which was only 93 basis points lower than the comparable quarter of 2022 despite continued cost pressures. Speaker 500:19:48Turning to the bottom line, our 4th quarter adjusted EBITDA was $79,200,000 and adjusted FFO per diluted share was $0.34 which came in towards the high end of our guidance. During 2023, we were very active in managing our balance sheet to create additional flexibility and further lower our cost of capital, which included extending $425,000,000 of mortgage debt, recasting our $600,000,000 corporate revolver and entered into a $225,000,000 term loan. The execution of these transaction is a testament to our strong lender relationships and favorable credit profile. We also took advantage of interest rate volatility to proactively manage our interest rate risk by entering into $525,000,000 of new interest rate swaps during the year. Turning to 2024, we will extend our $181,000,000 of mortgage loans and are in the process of refinancing our $200,000,000 secured loan, which is on track to wrap up during the Q2. Speaker 500:20:57Today, our balance sheet is well positioned with an undrawn corporate revolver, our current weighted average maturity is approximately 2.9 years, 81 of our 96 hotels are unencumbered by debt, Our weighted average interest rate is an attractive 4.12% and 89% of debt is either fixed or hedged. As it relates to our liquidity, we ended the quarter with approximately $517,000,000 of unrestricted cash, $600,000,000 of availability on our corporate revolver and $2,200,000,000 of debt. With respect to capital allocation, as Leslie said, we remain committed to returning capital to shareholders through a combination of both share repurchases and dividends. During the Q4, we were active under our $250,000,000 share repurchase program and repurchased approximately 930,000 shares for $9,900,000 at an average price of $10.69 per share. In total during 2023, we repurchased approximately 7,600,000 shares for $77,200,000 at an average price of $10.20 per share. Speaker 500:22:12Additionally, we ended the year with a quarterly common dividend of $0.10 per share, which is well covered and supported by our free cash flow. We will continue making prudent capital allocation decisions to position our portfolio to drive results during the entire lodging cycle, while monitoring the financing markets to identify additional opportunities to improve the laddering of our maturities, reduce our weighted average cost of debt and increase our overall balance sheet flexibility. Turning to our outlook. Based on our current view, we are providing full year 2024 guidance that anticipates a continuation of the current operating and macroeconomic environment. For the full year 2024, we expect comparable RevPAR growth between 2.5% 5.5%, comparable hotel EBITDA between $395,000,000 $425,000,000 corporate adjusted EBITDA between 360,000,000 dollars 390,000,000 and adjusted FFO per diluted share between $1.55 $1.75 Our outlook assumes no additional acquisitions after the Wyndham Boston and no dispositions, refinancings or share repurchases. Speaker 500:23:31We estimate 2024 RLJ capital expenditures will be in the range of $100,000,000 to $120,000,000 and net interest expense will be in the range of $91,000,000 $93,000,000 Our net interest will be above 2023 due to the impact of expiring swaps that had lower interest rates. Speaker 600:23:53With respect Speaker 500:23:53to the cadence for the year, we expect 2024 to follow similar quarterly seasonal patterns as 2023 other than the Q1, which will be impacted by the timing of Easter Finally, please refer to the supplemental information which includes comparable 2023, 2022 and 2019 quarterly and annual operating results for our 90 6 hotel portfolio. Thank you. And this concludes our prepared remarks. We will now open the line for Q and A. Operator? Operator00:24:31Thank you. We will now be conducting a question and answer Our first question comes from the line of Anthony Powell with Barclays. Please proceed with your question. Speaker 700:25:05Hi, good morning. Just a few questions on the Wyndham Beacon Hill deal. Could you maybe talk about multiple or cap rate or any way you can quantify, I guess, the valuation of the transaction? Speaker 400:25:23Let me frame the transaction and I will answer your question. I think that through our leasehold, we had the right to the cash flows for the next four and a half years. This transaction gave us the ability to buy the asset fee simple and have the rights to the cash flows forever. We took advantage of our unique position as leaseholder to have a competitive advantage. We use that competitive advantage and the current backdrop to give us ability to buy the asset at a very attractive level. Speaker 400:26:00Most recent transaction that happened at the Whitney was only 4 blocks away from our asset, it traded for 875,000 a key. We believe the value that we bought this at is at a significant discount to what we would have had to pay at the end of our lease. I mean keep in mind that this is bull's eye real estate. It's got significant FAR. It's scarcity of land value in Boston and we would have had no leverage and we would have been competing against not only hotel years, but we will also competing against alternative use and clearly Mass General who has 1,000,000,000 of dollars deployed towards strategic acquisitions. Speaker 400:26:41And so we believe that getting access to the upside of this asset earlier, getting a discount to what we would have had to compete for at the end of our lease more than offsets any remaining cash flow that we would have had in our lease term. And it allows us to unlock another compelling value creation opportunity and which we believe has 40 plus percent upside to the current EBITDA and from our perspective, we underwrote this to stabilize at 8.5 a multiple on a purchase price. And if you add in the CapEx based on the brands that we're looking at, it's another turn to turn and a half. Speaker 700:27:22Okay. So 9% to 9.5% I guess stabilized after CapEx. Is that the way to think about it? Speaker 400:27:28Yes, roughly. Speaker 700:27:30Okay. All right. And just maybe one more in terms of leisure trends. When you combine your weekend leisure plus your resort demand, it seems like you guys are doing pretty well in leisure generally. So maybe talk about how leisure as a whole is looking through this year? Speaker 700:27:47How did it trend in the back half of last year? And do you see a stabilization and improvement happening in that part of the business? Speaker 400:27:53Yes, I mean our general perspective is that leisure remains healthy. Our total revenues were up 4.3% year over year in the Q4 and that was room night driven. If we look at our just our weekends, our weekends were up 4.4% year over year and that was driven by 2 thirds demand as well. Urban weekends continued to be strong. We're about 114 percent of 2019 levels on urban weekends and that's 200 basis points ahead of where our overall portfolio is at. Speaker 400:28:24As you mentioned, our results were strong in the 4th quarter, up 6.6% and it's benefiting obviously from our conversions. But we saw strength in South Florida which was up 10% in Q4, Southern California was up. It's also we're clearly benefiting from the continued flexibility that work life live environment provides us. I would also say that as we look forward into the year, we expect leisure to remain strong and to be balanced between rate and Oc and urban leisure is going to drive that for us. Speaker 700:28:58Okay. Thank you. Operator00:29:02Our next question comes from the line of Gregory Miller with Truist. Please proceed with your Speaker 800:29:10I'd like to start off with the Marriott in Louisville. Could you share your thoughts about that property's the expectations for you all for 24 in that property, maybe about group pace or overall growth expectations relative to the full portfolio guidance? Thanks. Speaker 600:29:28Yes. Good morning, Greg. What I would say is Marriott Louisville not only is coming off of a good year this year because in 2023 it had about a 22% RevPAR growth. And the great thing about that RevPAR growth almost all of it came in ADR compared to 2019. And when we look into 2024, we're also very encouraged, your question about group pace, we're at 107% and as you know our location is connected to the convention center, so we're in position A. Speaker 600:30:00And a couple of things that I would also add, this year we had a couple of special events. It's the 150th year of Kentucky Derby will be celebrated. And one of the 4 major golf tournaments, the PGA tournament will be in Valhalla this year. So we get some benefits from that. And lastly, as Leslie mentioned, Urban Leisure, the Bourbon Trail is just another type of example of enjoying the venues that are driving that type of demand in an urban environment like that. Speaker 400:30:29And I would just sort of add just in general that our portfolio diversification is going to be really strong this year. We mentioned in our prepared remarks that Boston, New York and Southern California are going to be strong, but we also see strength in Atlanta, Louisville in terms of what Tom talked about, Denver, Pittsburgh and Orlando as well. So diversification is obviously benefiting our portfolio. Speaker 800:30:51All right, thanks. And then for the follow-up question, I'd like to ask about the transactions environment today. Your current expectations for upscale, chain scale transactions this year, perhaps coming out of the Alice conference? Do you anticipate that there's going to be a pickup in activity in the back half of this year? Or at this stage, do you think some of the hype is likely to be unrealized? Speaker 400:31:18No, look, I think as we sit here today, transaction volume continues to be constrained, but we do have an expectation like the broader market that transactions will improve, the volume will improve in the back half of the year, given the expectations around interest rates coming down. And that optimism has sort of flushed itself out through increased conversations in general, more previews of assets that Alice, which you just mentioned, BOBs are being done. And I think in general, because the concept of recession is generally off the table, sellers have been able to and people have been able to sort of underwrite a little bit more clarity. And so as a result, while the bid ask hasn't closed it's gotten a little bit closer and that makes things more actionable and we also think that creates a very attractive environment for all cash buyers at least for the next couple of quarters until interest rates come down. And longer it takes for interest rates to come down, that window for all cash buyers is elongated from that perspective. Speaker 400:32:16And what we're seeing from our perspective is that our team is actively underwriting, our pipeline is largely focused on unique situations that benefit all cash buyers. It could be related to the fact that a seller has a maturity, it could be related to fatigue by an equity partner or incremental capital that needs to be put in if the buyer doesn't want to put in. And so, we see things that are materializing today as a result of the current backdrop. Speaker 800:32:46Thanks. I appreciate it, Leslie. Operator00:32:50Our next question comes from the line of Michael Bellisario Speaker 900:33:011st question on guidance, maybe big picture, how are you thinking about the split between rate and occupancy growth in 2024? And then if my math is correct, it looks like expenses are maybe up 5.5% at the midpoint. Maybe help us understand what the building blocks are to get to that 5.5% number? Thanks. Speaker 400:33:20Yes, Mike, our perspective is that our growth is going to be split 2 thirds demand and 1 third rate. And if you sort of think about how our portfolio is indexed, we're indexed to urban, urban's indexed to BT and BT is still our BT revenues were only at 73% of 2019 levels and so there's room for growth both from a demand and occupancy perspective and so that's how we sort of thought about it. Speaker 500:33:51And Mike on the operating expenses, you're correct that the midpoint of guidance assumes sort of mid-five percent increases year over year. The cadence of that or the split of that rather is we expect the pressures around fixed costs to continue throughout 2024. And so that's really primarily driven by insurance and property taxes. So we would expect those fixed costs to be up in the low double digits again next year on the operating costs. I think on the variable costs, we'd expect them to be roughly 100 basis points lower growth rate than the overall operating costs driven by on a per occupied room basis, we expect our cost to only be up about 2% year over year. Speaker 500:34:45And so we think net net the operating cost environment, it improved throughout 2023 and we expect that improvement to continue into 2024 as the inflationary pressures are in a rearview mirror. Speaker 900:35:00Thanks. That's helpful. And then just one follow-up, just on Boston, could you provide what the hotel level EBITDA was in 2023? And how much was the ground rent expense, I. E. Speaker 900:35:09What's going away in 2024? And then any initial thoughts on San Diego given that that lease expires in 2019? Thanks. Speaker 500:35:18I'll start with some of the stats and then pass it over to Leslie to talk about San Diego. The hotel did roughly $10,500,000 of EBITDA in 2023 and the ground lease expense in 2023 was roughly $0.75 Speaker 400:35:39And then Mike, as it relates to San Diego, we're in active negotiations with the Port of San Diego to extend the lease. We feel very good about where we are in our discussions and we are a tenant that's in good standing and so we see a path forward in terms of extending the lease. Speaker 900:36:00Helpful. Thank you. Operator00:36:04Our next question comes from the line of Dorey Kaston with Wells Fargo. Please proceed with your question. Speaker 1000:36:11Thanks. Good morning. As you think through the phasing of your conversions, renovations over the next few years, should we assume that the upside is completed work fully offsets, I guess, ongoing renovation headwinds or are there certain projects that stick out as being particularly disruptive? Speaker 500:36:31Yes, Dory. So from a renovation displacement both because conversions are just a subset of our renovation dollars. We don't expect either a headwind or tailwind over the next several years related to renovations. And that's really a byproduct of us having an in house design and construction team that's able to sequence the rooms out of service on the conversions and renovations to minimize the time out of service and also have a scope that gets hotels back up and running as quick as possible. And so renovation disruption for us is not going to be either a headwind or tailwind for this year or for the next several years. Speaker 500:37:15From a ramp up perspective, you're correct. What we said is that we're going to launch a couple of conversions per year and we're sequencing that in a way that would allow us to have outsized growth in each one of those years. Generally speaking on our conversions, we underwrite a ramp of 2 to 3 years. If it's more leisure centric, we generally believe that that ramp can be in the 2 year versus the 3 year perspective, but that's our general assumptions. And then all of that when you put it all together is was baked into the bridges that we provided as part of our Santa Monica deck, and we provided how we expected the EBITDA for the conversions to ramp over the next 3 years. Speaker 1000:38:02And Sean, while I have you, you said that the expiration of swaps was the headwind in your 2024 FFO guide. Can you provide us with your view on your fixed versus floating exposure as we look out of the next year? Speaker 500:38:17Sure. So we ended the year with a little under 90% of our debt that was either fixed or hedged. Our long term strategy is to have anywhere from 20% to 30% of our debt as floating as a hedge against a downturn. If we did nothing else, we would end 2024 with a little under 30% of our debt floating. Now we were active in 2023 and managing it again in 2024, but we entered into $525,000,000 of swaps in 2023 at an average rate of roughly 3.5%. Speaker 500:38:58And so you'd expect us to continue to actively managing it. But generally speaking, that 20% to 30% floating is what we target for our long term. Speaker 1000:39:09Okay. And then just last, should we expect your dividend payout as a percentage of FFO per share to look more like 2019 by 2025? Just trying to get a sense of where your NOLs are, and how you might use those over the medium term? Speaker 500:39:26Yes. So we have several years of NOLs remaining. And so really our dividend policy is going to be based on what we think an appropriate payout ratio is. I think the way we're thinking about the payout ratio sort of I'll call it normalized in this environment is going to be less than it was in 2019 for all lodging REITs. And so our payout ratio today as FFO is in the mid-30s. Speaker 500:39:54We think our current payout ratio has room for increases over both this year and over the next couple of years. We think a normalized payout ratio is somewhere in the 60% to 65% of FFO at sort of the peak of this cycle. And you would expect us to be measured in how we increase that throughout the cycle. But the NOLs provide us, the flexibility to do that based on what we think is appropriate for the market. Speaker 100:40:27Okay. Thank you. Operator00:40:31The next question comes from the line of Tyler Batory with Oppenheimer. Please proceed with your question. Speaker 1100:40:37Good morning. Thank you. Speaker 200:40:39Can you please talk Speaker 1100:40:39through your industry RevPAR assumption that's implied in your guidance this year? Just trying to get a sense of what sort of outperformance you expect from your portfolio, versus the broader logic space? Speaker 400:40:56So I mean, look, our the baseline for our assumption is that our portfolio should perform in line with urban which is projected to be 3.8. And so clearly our midpoint of our guidance lines up with that. We expect Urban to outperform the industry. If you look at Q4 Urban outperformed the industry by 4 times. If you look at the full year Urban outperformed the industry by 2x. Speaker 1100:41:23Okay, perfect. And then, Marcos specific, can you talk through a little bit more, get some more color on what you're seeing in San Francisco, DVD and also talk about Silicon Valley as well please? Speaker 400:41:36Yes, I would say that overall keep in mind that we have a diversified footprint and we only have a few assets in the CBD. In the Q4, our CBD benefited from the citywides and also some self contained. Our Silicon Valley in the 4th quarter saw just weak transient and I think that was reflected in the numbers that we put on our supplement. Speaker 300:42:02As we look forward, Speaker 400:42:05San Francisco we acknowledge as we said in our prepared remarks is going to have a soft citywide, but we are seeing improvement in BT coming this year particularly as return to office increases and as the activity around AI continues to increase as well. But I would say that generally Tyler that if you look at the headline risk that San Francisco had, it's continuing to subside. The headlines recently have been very positive around the amount of leasing that's going on in the market as well as what's happening from an AI perspective. The city has done a great job from a standpoint of addressing safety. They had some successes with APAC last quarter and so we continue to see the groundwork being laid for San Francisco to recover. Speaker 1100:42:57Okay. And then how about Silicon Valley? Any commentary there? I mean, it's probably similar to what you just articulated in terms of San Francisco? Speaker 600:43:06Sure. I'll add a little color on that too. So in Silicon Valley, it's important that we have international deployment. When we think about what's happening in forward booking from China as well as project business that comes there. It was encouraging to see in September, October, November that we're starting to get closer to about 95% of deployment from an international standpoint. Speaker 600:43:30And forward booking for China, it's supposed to be 3 times more than it was in 2023. So that's encouraging. What I would say is we have a lot of extended stay hotels in Silicon Valley and we have one that's under renovation. There we're prepared the summertime of 2024. And we're encouraged based on some of the back to office that we were talking about for tech and some of the businesses are kind of congregating and moving towards having more demand. Speaker 600:44:00We saw already in Q1 a little bit more demand than we did in Q4. So that was encouraging as we come out of the gate in 2020 Speaker 1100:44:094. Okay, great. That's all for me. Thank you for the detail. Operator00:44:14Our next question comes from the line of Chris Darling with Green Street Advisors. Please proceed with your question. Speaker 1200:44:21Thank you. Good morning. Leslie, going back to your comments around the transaction market, how are you thinking about incremental asset sales in light of the implied EBITDA multiple at which you trade relative to private hotel pricing? Speaker 400:44:37So, Chris, I would say that look, I think you should expect us to be active portfolio managers. As the industry and market dynamics unfold, we're evaluating the impact on our portfolio. As a new normal takes hold, we'll look at our views on current markets and how they evolve. We don't have to sell assets because given our balance sheet, but we can be opportunistic and so as we think about the growth rates in certain markets and how that profile compares to our overall portfolio or the capital needs and an asset needs relative to the returns it can generate, we'll look to recycle assets along that way. But I think from our perspective, it's an asset by asset kind of perspective. Speaker 1200:45:19All right. Appreciate those thoughts. And then maybe just following up on the comments you just provided around the Bay Area. If I look at the overall portfolio, I see that 2023 EBITDA margins finished about 300 basis points below comparable 2019 levels. I'm curious what that would look like if you excluded the Bay Area, just trying to get a sense of what the upside might be as that region continues to ramp? Speaker 500:45:48Yes, Chris. So without the Bay Area, that is the primary driver of our sort of where our EBITDA is relative to 2019. From a margin perspective, the lion's share of it comes from Northern California. So if you exclude Northern California from our portfolio, the margins are much closer, if not right on top of 2019. But we as Leslie mentioned, our view around the green shoots in Northern California gives us some encouragement going forward. Speaker 500:46:23But when you look at the delta to 2019, Northern California is driving that gap. Speaker 1200:46:30All right. That's helpful. That's all for me. Thank you. Operator00:46:36Our next question comes from the line of Austin Wurschmidt with KeyBanc. Please proceed with your question. Speaker 1300:46:42Great. Thanks. Good morning, everybody. Just going back to the transaction theme. Leslie, I think you discussed looking for unique opportunities that benefit all cash buyers. Speaker 1300:46:51I guess how much additional dry powder do you have before you'd need to match fund any capital outlays with either dispositions or some other capital raise? Speaker 400:47:04Yes. Listen, I don't have a good number for you. But what I would say is, is that we feel good about in our pipeline relative to where our current balance sheet sits. Speaker 500:47:13Yes. And I'll just add on, right, we're sitting at year end with a little over $500,000,000 of corporate cash. We used $125,000,000 of that for Boston. And so pro form a, that's $375,000,000 of cash. Our portfolio generates roughly 25% of our EBITDA turns into free cash flow on an annual basis, right? Speaker 500:47:37So on average, that's north of $100,000,000 of incremental free cash flow generated by portfolio, which obviously creates incremental capacity as well. But I think we've got, I think the takeaway is that with our existing balance sheet and our free cash flow, we have the flexibility for incremental deals without having to go anywhere near the markets unless it's favorable to do so. Speaker 1300:48:03And then of that free cash flow that you just highlighted, I guess how much of that goes towards some of the renovation spend that you're doing and how much is sort of freed up to share buybacks, acquisitions and other sort of capital allocation opportunities? Speaker 500:48:19That percentage in those numbers are after everything, including assumption on dividends as well as CapEx. Speaker 1300:48:27That's helpful. And then on the renovation side, I guess, how soon could you commence the renovation at the Boston Wyndham? And do you have a sense today of the capital spend necessary to achieve that 40% upside to hotel EBITDA that you highlighted? Speaker 400:48:44Yes, I mean, we're still negotiating with the brands, Austin. So that number is sort of a range that we're working through. I would say in terms of timing, our objective is to have the ask completed before World Cup, which was mid-twenty 26. Speaker 1300:49:02Very helpful. Thank you. Operator00:49:07Our next question comes from the line of Florus Van Dykem with Compass Point. Please proceed with your question. Speaker 1400:49:15Hey, thanks for taking my question. So let me flip it on its head. I know there are a couple of questions here on Northern California, but I still see a 40 $6,000,000 delta relative to 2019 levels. Can you maybe comment on the markets that are the highest in terms of exceeding 2019 levels of EBITDA? And how much more can you push you think your urban markets in 24? Speaker 1400:49:55Is that growth going to that you're expecting, is that coming from other markets besides Northern California? Do you see a steady progress in all of your markets in 2024? Speaker 200:50:10Yes, of course, as Speaker 400:50:10I mentioned before, our performance this year has been driven broad based. We talked about in our prepared remarks that Boston is strong given its citywide base and self contained. It also has a strong base of BT. New York, we talked about leisure remaining strong and ramping as well as limited new supply. Atlanta is going to benefit from the backlog in the rider strike. Speaker 400:50:36Southern California is going to benefit from San Diego citywide as well as strong economic base and given the industries that it caters to. Louisville, we talked about being strong as well. Denver, which has got good corporate base. Pittsburgh as well, Orlando. The diversification in our portfolio is more than enough to offset the slower ramp in that we're seeing in San Francisco. Speaker 500:51:03Yes. And what I'll add to that Lars is we put out an EBITDA bridge as part of our materials in Santa Monica and Boston, right. That EBITDA bridge was for the next several years and got us to north of $500,000,000 of EBITDA relative to the I'm using round numbers, but roughly $450,000,000 in 2019. And so we wouldn't have put that data point out had we not had confidence in the ability of the portfolio to get ahead of that. And what's driving that is obviously Urban has been driving it to date. Speaker 500:51:37We believe the conversions and the incremental EBITDA associated with Operator00:51:39those ROI initiatives are driving that. But you have a Speaker 500:51:40portfolio for a reason to Leslie's we have confidence that we will go through 2019 over the next several years. Speaker 1400:51:57Thanks. Maybe a follow-up question on San Diego. Presumably, you will not be able to buy the Freehold in San Diego. It's just an extension of the lease. So can we assume some sort of similar type of cost going forward on that? Speaker 1400:52:15Or is there going to be a greater profit share that you're going to have to give away to the city or the, I guess, whatever local municipality that owns the freehold on that property? Speaker 400:52:28Hey, Florence, I appreciate the question, but we're in confidential negotiation, so I can't comment on your question. Speaker 1400:52:36Fair enough. Maybe one additional follow-up then. For Sean, your weighted average term of your debt is relatively short at 2.9 years today. Are you waiting for rates to come down? And will you be looking to extend the maturity on your debts when that does occur? Speaker 1400:53:01Or how are you thinking about the balance sheet and the term of your debt going forward? Speaker 500:53:08Yes. Listen, as a general rule, we always want to get ahead of our debt maturities. And we have, a little under $400,000,000 of maturities in the next quarter. We are in the process of extending $181,000,000 of that, which is represented by 2 loans. And so we have extension rights under those loan agreements just for probably those the combined debt yield of those two loans is 14.5 times, right? Speaker 500:53:42So let's say these are low levered, well covered loans. We have the contract right and so we're just working with the lender right now to extend that. We will get that done shortly. And then the other is a $200,000,000 loan that we are in the process of refinancing and we've got multiple options on that loan, which will add tenure as well. So we've got great lender relationships. Speaker 500:54:06We've shown the ability to extend the debt, but those will then when we take care of that in very short order obviously, we'll have an impact of roughly half a year on the weighted average maturity. Speaker 1400:54:22Thanks. That's it for me. Operator00:54:25Our next question comes from the line of Bill Crow with Raymond James. Please proceed with your question. Speaker 1500:54:31Hey, good morning. I'm just curious, Leslie, at Alice, one of the main discussion points was all the deferred CapEx out there. And it's not really a big issue for the REITs except for the fact that it kind of damages brand reputation. I wanted to get your perspective on whether the brands are doing enough, have enough discipline on the owners, non REIT owners, or whether we should really be concerned about the destruction of brand value? Speaker 400:55:05Bill, thanks for the question. I think the brands have been good partners for owners through COVID creating opportunities for people to manage through that. And they have been consistently stair stepping back into capital programs and adjusting those in waves and they now have pushed back to more traditional levels of requiring PIPs to be executed in addition to putting programs in place. I hesitate to say penalties, but programs in place to ensure that those get executed. But I would also say is that owning hotels is ecosystem and to the extent that an owner has pressure from that, that will have create a catalyst for trading the asset and that capital will get put in. Speaker 400:55:56So the brands are as transactions occur being very rigid around ensuring that those that the capital plans get executed. So I would say that, yes, there's somewhat of a backlog. I don't believe it's damaging the brand And I believe that what the brands are doing to ensure that the plans get done will cleanse the entire ecosystem. Speaker 200:56:18Okay. That's it for me. Thank you. Operator00:56:21Thank you. Ms. Hale, we have no further questions at this time. I would now like to turn the floor back over to you for closing comments. Speaker 400:56:29Thank you everybody for joining us. The strong results that we've shown and we expect to continue are the direct results of what we've been executing around curating a portfolio that benefits from 7 day a week demand in key urban markets. We look forward to providing you additional updates as we progress throughout the year. Thank you again for joining us. Operator00:56:49Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time.Read morePowered by