Xenia Hotels & Resorts Q2 2025 Earnings Report

Xenia Hotels & Resorts EPS Results

• Actual EPS: $0.57
• Consensus EPS: $0.43
• Beat/Miss: Beat by +$0.14
• One Year Ago EPS: $0.52

Xenia Hotels & Resorts Revenue Results

• Actual Revenue: $287.58 million
• Expected Revenue: $273.43 million
• Beat/Miss: Beat by +$14.15 million
• YoY Revenue Growth: +5.40%

Xenia Hotels & Resorts Announcement Details

• Quarter: Q2 2025
• Date: 8/1/2025
• Time: Before Market Opens
• Conference Call Date: Friday, August 1, 2025
• Conference Call Time: 10:00AM ET

Xenia Hotels & Resorts (NYSE:XHR) is a real estate investment trust, which engages in the provision of investment in luxury and upper upscale hotels and resorts. It also owns a diversified portfolio of lodging properties operated by Marriott, Kimpton, Hyatt, Aston, Fairmong, and Loews. The company was founded in 2007 and is headquartered in Orlando, FL.

Xenia Hotels & Resorts Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: The portfolio delivered a 4% same-property RevPAR increase (driven by Grand Hyatt Scottsdale’s renovation) and an 11% rise in total RevPAR on robust group demand.
• Positive Sentiment: Second quarter same-property hotel EBITDA rose 22.2% with a 269 basis-point margin improvement (11.5% and 148 bps ex-Scottsdale), fueled by outsized catering revenues and tight expense control.
• Positive Sentiment: Group business remains a bright spot: Q2 group room revenues were up 15.6% (7.6% ex-Scottsdale), with second-half group pace +16% (7% ex-Scottsdale) and 2026 group room revenue pace up 40%.
• Positive Sentiment: Full-year guidance was raised, lifting adjusted EBITDAre midpoint by $8 million to $256 million and boosting adjusted FFO per share to $1.73, an 8% year-over-year increase.
• Neutral Sentiment: Capital allocation priorities include a $25 million reduction in 2025 CapEx to $75–85 million, $50.8 million invested in H1, $673 million of liquidity, and $71.5 million in share repurchases year-to-date.

Presentation

[Operator]

Hello, everyone, and welcome to the Xenia Hotels and Resorts Inc. Q2 twenty twenty five Earnings Conference Call. My name is Carla, and I will be coordinating your call today. I will now hand you over to your host, Aldo Martinez, Manager of Finance, to begin. Please go ahead when you're ready.

[Aldo Martinez, Manager - Finance at Xenia Hotels & Resorts]

Thank you, Carla, and welcome to Xenia Hotels and Resorts second quarter twenty twenty five earnings call and webcast. I'm here with Marcel Verboss, our Chair and Chief Executive Officer Barry Bloom, our President and Chief Operating Officer and Atish Shah, our Executive Vice President and Chief Financial Officer. Marcel will begin with a discussion on our performance. Barry will follow with more details on operating trends and capital expenditure projects. Anatish will conclude today's remarks on our balance sheet and outlook.

[Aldo Martinez, Manager - Finance at Xenia Hotels & Resorts]

We will then open the call for Q and A. Before we get started, let me remind everyone that certain statements made on this call are not historical facts and are considered forward looking statements. These statements are subject to numerous risks and uncertainties as described in our annual report on Form 10 ks and other SEC filings, which could cause our actual results to differ materially from those expressed in or implied by our comments. Forward looking statements in the earnings release that we issued this morning, along with the comments on this call, are made only as of today, 08/01/2025, and we undertake no obligation to publicly update any of these forward looking statements as actual events unfold. You can find a reconciliation of non GAAP financial measures to net income and definitions of certain items referred to in our remarks in our second quarter earnings release, which is available on the Investor Relations section of our website.

[Aldo Martinez, Manager - Finance at Xenia Hotels & Resorts]

The property level information we'll be speaking about today is on a same property basis for all 30 hotels unless specified otherwise. An archive of this call will be available on our website for ninety days. I will now turn it over to Marcel to get started.

[Marcel Verbaas, Chair & CEO at Xenia Hotels & Resorts]

Thanks, Paulo, and good morning, everyone. We are pleased with our second quarter performance as our portfolio delivered results that meaningfully surpassed our expectations. Both revenues and hotel EBITDA increased significantly compared to the same period last year, which is especially encouraging during a time when industry performance continues to be choppy in an uncertain macroeconomic climate. Performance at our recently renovated and up branded Grand Hyatt Scottsdale Resort continues to be on track and was the main driver of our 4% same property RevPAR increase for our 30 hotel portfolio for the quarter. This 4% increase was driven by 140 basis point increase in occupancy and a 2% increase in average daily rate.

[Marcel Verbaas, Chair & CEO at Xenia Hotels & Resorts]

As mentioned in our release this morning, we saw very strong group business demand throughout the portfolio during the quarter. This strengthened group business drove substantial food and beverage revenue increases at a number of our properties, which greatly contributed to an 11% increase in same property total RevPAR compared to the second quarter of last year. For the 2025, we reported net income of $55,200,000 adjusted EBITDAre of $79,500,000 and adjusted FFO per share of $0.57 which was an increase of 9.6% compared to the same quarter last year. Second quarter same property hotel EBITDA of $84,000,000 was 22.2% above levels, and hotel EBITDA margin increased two sixty nine basis points. Excluding Grand Hyatt Scottsdale, second quarter hotel EBITDA increased 11.5% and hotel EBITDA margin increased 148 basis points.

[Marcel Verbaas, Chair & CEO at Xenia Hotels & Resorts]

The majority of our second quarter outperformance was the result of outsized gains and highly profitable catering revenues that substantially exceeded our expectations at a majority of our group oriented hotels. When coupled with lower than expected expense growth across our portfolio, this yields solid operating margins and hotel EBITDA growth. Additionally, our EBITDA margin benefited from the timing of approximately $1,500,000 in property tax refunds that were received during the second quarter. For the second quarter, same property group room revenues increased 15.6% as compared to the same period last year and increased by 7.6% when excluding Grand Hyatt Scottsdale. Corporate transient demand continues to recover slowly, while leisure demand has continued to normalize over the past several months and into the summer season.

[Marcel Verbaas, Chair & CEO at Xenia Hotels & Resorts]

Performance at the newly up branded Grand Hyatt Scottsdale resort has been encouraging, and revenues and bottom line performance are tracking in line with our underwriting expectations thus far. Although leisure demand in the Phoenix Scottsdale market has been a bit softer this year. The trajectory of group demand continues to improve both in the quarter and for the future. The property saw group market share improve each month during the second quarter, which culminated in the resort exceeding twenty nineteen group room nights and revenue during the quarter and achieving above fair share in its competitive set for the first time post renovation in June. The group's success translated to extremely strong banquet and catering revenues, with the resort producing the highest such revenues on record for the month of June. We are pleased with the progress that has been made thus far and remain confident in our investment thesis and the earnings growth that we expect this outstanding property to deliver over the next several years. In addition to the strong growth in Scottsdale during the second quarter, we saw outsized RevPAR growth in Pittsburgh, Orlando and our California markets.

[Marcel Verbaas, Chair & CEO at Xenia Hotels & Resorts]

Fairmont Pittsburgh had an extremely strong quarter, which was aided by the U. S. Open taking place at Oakmont in June. In our California markets, we experienced particularly strong RevPAR growth in Santa Barbara, San Francisco and Santa Clara. On the transaction side, on our last earnings call, we discussed the sale of Fairmont Dallas, which was completed early in the second quarter.

[Marcel Verbaas, Chair & CEO at Xenia Hotels & Resorts]

As a reminder, we sold the hotel for $111,000,000 generating an unlevered IRR of 11.3% over our approximately fourteen year hold period. We estimate that approximately $80,000,000 of near term capital expenditures would have been required to maintain and improve the hotel's market position. And we believe that the sale of the hotel was a superior capital allocation decision for the company. Now turning to our capital expenditure projects, we continue to project that we will spend between 75,000,000 and $85,000,000 on property improvements during the year, which as you will recall is an approximately $25,000,000 reduction from the amount we projected at the start of the year. We strongly believe we acted prudently to reduce our capital expenditures in an environment in which tariffs on imported goods remain uncertain and could be meaningful.

[Marcel Verbaas, Chair & CEO at Xenia Hotels & Resorts]

Our project management team has done an outstanding job in evaluating all ongoing and upcoming projects to mitigate any impact to the extent possible, including identifying alternative sources for goods and materials. Barry will provide an update on our ongoing and upcoming capital projects during his remarks. Looking ahead, the second half of the year is shaping up in line with our prior expectations. Group business continues to be a bright spot and is expected to be particularly strong in the fourth quarter. Meanwhile, corporate transient demand is continuing to recover slowly, while leisure demand continues to normalize, consistent with our expectations at the start of the year.

[Marcel Verbaas, Chair & CEO at Xenia Hotels & Resorts]

We estimate that July RevPAR growth for our 30 hotel portfolio was slightly negative compared to the same period last year. While this is a slowdown from the RevPAR growth we experienced in the second quarter, we had anticipated this as the summer months are more dependent on leisure demand that, as we expected, is a bit weaker than last year. Additionally, RevPAR growth was very strong in the Houston market in July in the aftermath of Hurricane Beryl. When we exclude our Houston hotels, we estimate that RevPAR for the remainder of the portfolio increased by approximately 3% in July. Given recent trends, we have increased our full year guidance for adjusted EBITDAre and adjusted FFO to reflect our outperformance in the second quarter and an unchanged outlook for the second half of the year.

[Marcel Verbaas, Chair & CEO at Xenia Hotels & Resorts]

While we expect revenue growth to be muted in the third quarter, we are anticipating a stronger fourth quarter as our group revenue pace for the quarter continues to be highly encouraging. We believe that owning a portfolio of luxury and upper upscale hotels and resorts that are not heavily dependent on inbound international and government demand is particularly beneficial in the current economic environment, and we saw the benefits of this in our second quarter results. We continue to be optimistic regarding future growth prospects for our high quality portfolio and our ability to drive shareholder value through superior capital allocation decisions, such as the successful disposition of Fairmont Dallas and the repurchase of almost 6,000,000 shares of our common stock year to date at an attractive valuation. I will now turn the call over to Barry to provide more details on our operating results and capital projects.

[Barry Bloom, President & COO at Xenia Hotels & Resorts]

Thank you, Marcel, and good morning, everyone. For the second quarter, our same property portfolio RevPAR was $195.51 based on occupancy of 72.3% at an average daily rate of $270.42 an increase of 4% as compared to the second quarter in 2024. Excluding Grand Hyatt Scottsdale, second quarter RevPAR was $194.87 an increase of 0.4% as compared to 2024. This increase reflected a decrease of 40 basis points in occupancy for the period and an increase of 0.9% in average daily rate as compared to the 2024. Our top performing hotels in the quarter were Grand Hyatt Scottsdale with RevPAR up nearly 150%, Fairmont Pittsburgh up almost 30%, Kimpton Canary Santa Barbara up 10%, Park Hyatt Aviara, Hyatt Regency Santa Clara and Marriott San Francisco Airport each up approximately eight percent and Hyatt Regency Grand Cypress up just over 7%.

[Barry Bloom, President & COO at Xenia Hotels & Resorts]

Strength in group business and continued improvement in corporate demand was the driver behind the success at most of these properties. Hotels that experienced RevPAR weakness compared to the 2024 include Royal Palms, which suffered from softer leisure demand both Portland hotels, which experienced an anticipated decline in citywide convention demand Marriott Dallas, which lapped last year's solar eclipse and saw softer citywide convention demand and Western Oaks and Galleria, which experienced softer in house group demand. Looking at each month of the quarter compared to 2024, April RevPAR was $207.24 up 3.7%. May RevPAR was $194.8 up 3%. And June RevPAR was $184.5 up 5.5%.

[Barry Bloom, President & COO at Xenia Hotels & Resorts]

We've seen continued recovery in corporate and group rates, and we continue to achieve significant RevPAR growth across the portfolio on Tuesday and Wednesday nights, with RevPAR growing ex Scottsdale at 4.63.6% for the quarter respectively, with growth in both occupancy and rate. This growth was mitigated by RevPAR declines on weekend and Monday nights with occupancy declines related primarily to softening leisure demand. Business from the largest corporate accounts across our portfolio continues to grow significantly, although still meaningfully behind 2019 levels. We note that compared to 2019, which excludes Hyatt Regency Portland and W Nashville, during the second quarter, daily occupancy still trailed by approximately six to eight occupancy points mid week and the corporate business from small and medium sized accounts has recovered much more significantly. Recent performance on our corporate transient driven hotels gives us confidence that we still have significant growth ahead, particularly during high business travel demand periods.

[Barry Bloom, President & COO at Xenia Hotels & Resorts]

Group business continues to be a bright spot across the portfolio. For the second quarter, excluding Grand Hyatt Scottsdale, group room revenues were up 7.6% compared to the second quarter of last year. This growth was driven more significantly by room nights, which were up 6.5% and by average rate, which was up 1%. Food and beverage revenue from groups was particularly strong in the second quarter as high quality corporate groups continue their trend toward higher end catered events. Now turning to expenses and profit.

[Barry Bloom, President & COO at Xenia Hotels & Resorts]

Second quarter same property total revenue increased 11% compared to the 2024. Hotel EBITDA margin improved by two sixty nine basis points, resulting in hotel EBITDA of $84,000,000 an increase of 22.2%. Since Granite Heights Scottsdale was undergoing its transformative renovation last year, the following P and L analysis is presented for the remainder of the same property portfolio, which had excellent results for the quarter. Hotel EBITDA was $77,400,000 an increase of 11.5% on a total revenue increase of 5.9%, resulting in a margin improvement of 148 basis points. Room's department expenses increased just over 3% on 0.4% RevPAR growth.

[Barry Bloom, President & COO at Xenia Hotels & Resorts]

Food and beverage revenue growth is outstanding with overall growth of 12.7% and banquet revenue growth of nearly 20%, driven by higher quality corporate group business compared to the second quarter of last year, driving margin improvement of over 300 basis points. Other operating department income, including spa, parking and golf revenues, was up 5% and total revenue increased by 5.9%. In the undistributed departments, expenses in A and G and sales and marketing were very well controlled. A and G declined by 1.1% compared to last year, while sales and marketing expenses grew by just 2.1% reversing the increasing trend we've experienced over the past several quarters. Property operations and utilities expenses were up 4.87.3% respectively.

[Barry Bloom, President & COO at Xenia Hotels & Resorts]

For needed CapEx, during the second quarter, we invested $18,500,000 in portfolio improvements, which brings our total for the first half of the year to $50,800,000 These amounts are inclusive of capital expenditures related to the substantial completion of the transformative renovation of Grand Hyatt Scottsdale. We made significant progress during the quarter on select upgrades to guest rooms at a number of properties, including Renaissance Atlanta Waverly, Marriott San Francisco Airport, Hyatt Centric Key West, Hyatt Regency Santa Clara, Grand Bohemian Mountain Brook, Grand Bohemian Charleston, and Kimpton River Place. This work will continue throughout the year and is being done based on hotel seasonality and is expected to result in minimal disruption. We expect to commence work in the fourth quarter on a limited room renovation at Fairmont Pittsburgh and a renovation of the M Club at Marriott Dallas Downtown. At Grand Hyatt Scottsdale, we began work on improvements to the building facade and parking lot in the second quarter with completion expected in the third quarter.

[Barry Bloom, President & COO at Xenia Hotels & Resorts]

Additionally, we continue to perform significant infrastructure upgrades at 10 hotels this year, including facade waterproofing, filler replacements, elevator and escalator modernization projects and fire alarm system upgrades. With that, I will turn the call over to Atish.

[Atish Shah, EVP & CFO at Xenia Hotels & Resorts]

Thanks very much, Barry. I will provide an update on two items this morning, our balance sheet and 2025 guidance. At quarter end, we had approximately $1,400,000,000 outstanding debt. Just over three quarters of our debt was hedged or hedged to fixed. Our weighted average interest rate at quarter end was 5.7%.

[Atish Shah, EVP & CFO at Xenia Hotels & Resorts]

Additionally, at quarter end, our leverage ratio was approximately five times trailing twelve month net debt to EBITDA. Pro form a for the sale of Fairmont Dallas, our leverage ratio was 5.2 times. We expect our leverage ratio to further decline as Grand Hyatt Scottsdale continues to stabilize. As a reminder, we have no preferred equity or senior capital. Our long term leverage target is in the low three to low four times range.

[Atish Shah, EVP & CFO at Xenia Hotels & Resorts]

Our debt maturities continue to be well laddered. And at quarter end, our debt had a weighted average duration of three point seven years. The vast majority of our properties, in fact, 27 of our 30 hotels are unencumbered. As to liquidity, we finished the second quarter with $173,000,000 of available cash, excluding restricted cash. Our 500,000,000 revolver remains undrawn.

[Atish Shah, EVP & CFO at Xenia Hotels & Resorts]

Therefore, total liquidity was $673,000,000 Our Board authorized a second quarter dividend of $0.14 per share. If annualized, this reflects an approximate 4.5% yield on our current share price. As to payout ratio, if annualized, this reflects a payout ratio of just under 50% of funds available for distribution or FAD. Our long term target is a payout ratio of 60% to 70% of FAD consistent with our pre pandemic payout range. During the quarter, we we repurchased $35,700,000 of common stock.

[Atish Shah, EVP & CFO at Xenia Hotels & Resorts]

Since the year began, we have repurchased $71,500,000 of stock, which equates to 5.6% of our outstanding shares at year end 2024. Our year to date weighted average buyback price is $12.58 per share. We have $146,000,000 of remaining capacity under our share repurchase authorization. We continue to believe our shares are a good value given the outlook, our balance sheet and relative to other uses of capital. Turning next to my second topic, our current 2025 full year guidance.

[Atish Shah, EVP & CFO at Xenia Hotels & Resorts]

We are increasing our current full year guidance for adjusted EBITDAre by $8,000,000 at the midpoint to $256,000,000 The increase reflects the carry through of our second quarter beat with no change in outlook overall outlook for the second half. As to the specifics of each of the third and fourth quarters, and this is important from a modeling perspective, our cadence of earnings has evolved slightly. Our expected adjusted EBITDAre weighting is as follows. In the third quarter, we expect to earn about 15% of full year adjusted EBITDAre. And in the fourth quarter, we expect to earn a quarter of full year adjusted EBITDAre.

[Atish Shah, EVP & CFO at Xenia Hotels & Resorts]

The rationale for this slight change to weighting is threefold as follows. First, we have fine tuned our quarterly estimates as we have a better grasp on the seasonality of our portfolio. Second, the timing of approximately $1,500,000 in tax refunds moved from the third quarter to the second quarter. And lastly, relative to our prior forecast, our properties expect a smid soft leisure demand in the third quarter and a touch better group demand in the fourth quarter. Moving ahead to our RevPAR outlook, the midpoint is unchanged at 4.5% growth.

[Atish Shah, EVP & CFO at Xenia Hotels & Resorts]

Exclusive of Grand Hyatt Scottsdale, we expect RevPAR to grow 1.5% for the full year, which is consistent with our prior guidance. Our implied second half RevPAR guide of approximately 3.6% growth at the midpoint reflects a flattish summer followed by better growth in the fall, again driven by Scottsdale. Exclusive of Scottsdale, our full year guidance implies less than 1% back half RevPAR growth across the portfolio. The key months for us are September and October, and we expect our strong group base to provide compression to enable our properties to optimize the transient segment. Turning to group business, which by way of reminder was about 35% of our overall mix in 2024, which is up a couple points versus prior years, our outlook continues to be strong.

[Atish Shah, EVP & CFO at Xenia Hotels & Resorts]

As of the June, group room revenue pace for the second half is up 16%. Excluding Grand Hyatt Scottsdale, it's up 7%. While this reflects an expected moderation from a few months ago, it sets us it sets us up well for the second half, particularly the fourth quarter, and we remain on track to have a stellar group year. Looking ahead to 02/1926, group revenue pace is up with over 40% of our estimated group rooms revenue for '26 definite as of June 30. Exclusive of Scottsdale, group room revenue pace is up in the low teens percentage range for 02/1926.

[Atish Shah, EVP & CFO at Xenia Hotels & Resorts]

Inclusive of Scottsdale, group pace is up in the mid teens percentage range. We are seeing strength across the portfolio, and this speaks to the quality of our assets, the investments we have made in meeting space and group amenities, and the power of branded hotels in attracting group demand from the association, corporate, and leisure segments. So, again, early indications are that 2026 will be a strong group year. Over time, we believe the group segment can reach the high 30% range of our rooms revenues. Given the increasing importance of nonrooms revenue that is driven by this group demand, we have introduced total RevPAR disclosure in the table on Page three of our earnings release.

[Atish Shah, EVP & CFO at Xenia Hotels & Resorts]

Moving ahead to hotel EBITDA margin, the drivers of second quarter's strong gain were: a, banquet and catering profitability and b, expense controls on the undistributed areas of the P and L. We expect these dynamics to continue in the second half, albeit at a lower pace. In addition, second quarter margin benefited from property tax refunds, which boosted margins by approximately 60 basis points in the quarter. Overall, we expect second half hotel EBITDA margin to be flat to last year. Excluding Scottsdale, we expect hotel EBITDA margin for the second half to decrease approximately 100 basis points.

[Atish Shah, EVP & CFO at Xenia Hotels & Resorts]

Our guidance for interest expense, income tax expense and capital expenditures are unchanged. We expect cash G and A expense to increase by $1,000,000 due to higher incentive compensation because of the increase to full year earnings. And finally, our adjusted FFO per diluted share guidance midpoint is at 1.73 which is an increase of $0.11 at the midpoint. This reflects both the increase in adjusted EBITDAre as well as the beneficial impact of share repurchases. Relative to 2024, our guidance reflects over 8% growth in adjusted FFO per share.

[Atish Shah, EVP & CFO at Xenia Hotels & Resorts]

In closing, our strong performance in the second quarter reflects many of the positive attributes of our portfolio. We have a high quality premium all branded collection of assets that benefit from group as well as transient demand. We are seeing the benefit of having multiple earnings levers at the property level. And as we look forward, we are encouraged by the supply outlook. Annual U.

[Atish Shah, EVP & CFO at Xenia Hotels & Resorts]

S. Lodging supply growth for higher end hotels is expected to fall from the 1.5% range at present to two tenths of 1% by 2028. Overall, industry supply growth is for 2028 is even lower at one tenths of 1%. If this comes to fruition as projected, it will make for the best backdrop for top line growth that we have had in the last two decades. That concludes our prepared remarks.

[Atish Shah, EVP & CFO at Xenia Hotels & Resorts]

And with that, we will turn the call back over to Carla to begin our question and answer session.

[Operator]

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star followed by one on your telephone keypad. If you change your mind, please press star followed by two. You.

[Operator]

And the first question comes from David Katz with Jefferies.

[David Katz, Managing Director at Jefferies]

Hi, good morning everyone. Thanks for all the details and thanks for taking my question. So I wanted to just sort of float the conversation about stock buybacks. And they obviously are not a sort of broad based cure all. But given that you've come through a CapEx cycle clearly quite well, and I think the sort of valuation discussions I think have been had many times over, How are you thinking about buybacks and potentially the prospect of maybe ramping those?

[Atish Shah, EVP & CFO at Xenia Hotels & Resorts]

Hey, David. Thanks for the question. I think we continue to think buybacks are a good tool to drive shareholder value. And I think, you know, you've seen us be very active on that front, maybe more so, than others in the in the peer set even, you know, and even, you know, this year. I mean, we bought, you know, a a large amount of our float back thus far, at a price that's roughly in line with where we trade today.

[Atish Shah, EVP & CFO at Xenia Hotels & Resorts]

So I think we remain very open to it. We've been very active with buybacks. And, you know, on the counterbalance, you know, there are obviously some, including our leverage level and being mindful of that. So, you know, I would say we continue to utilize it as a tool, to drive, value for our ownership base.

[David Katz, Managing Director at Jefferies]

And just, you know, one more more broad based follow-up. You know, so far, we've we've obviously come through earnings. And and I guess I would, you know, ask your collective help in just in classifying some of the dispersion we've seen in outlooks, right, where you obviously have fully loaded new assets that are helping group, right? But some of the group commentary has been mixed. Some of the leisure transients seems to be a bit mixed.

[David Katz, Managing Director at Jefferies]

Some of the BT is mixed. How might you help us explain sort of what we're seeing out there?

[Marcel Verbaas, Chair & CEO at Xenia Hotels & Resorts]

Yeah. Sure, David. I I from my perspective, you know, really focusing on our portfolio, obviously, we're not very dependent on on kind of large citywide conventions. And I think some of our peers benefited from that a little bit last year in some of the markets where they have a little greater concentration than we have. So we didn't necessarily benefit from a from a great group set up last year, but we've had a really good group set up this year and also going into next year as as Atish talked about a little bit or, you know, kind of the early numbers on our base for next year.

[Marcel Verbaas, Chair & CEO at Xenia Hotels & Resorts]

So we we've obviously invested a good amount of money over the last several years too in upgrading a lot of our meeting facilities at some of our larger hotels. You know, the new ballroom that we created at High Green Sea Grant Cypress, clearly what we did here very recently at Scottsdale significantly expanding the ballroom space there. We've But spent a good amount of money of upgrading our other facilities as well. So I think it set us up well for for really capturing a lot of the high end corporate business corporate group business. We're also seeing, you know, a bit of a pickup now in the associations on the group side.

[Marcel Verbaas, Chair & CEO at Xenia Hotels & Resorts]

So for us, as we got into the year, and I and I mentioned this a couple times in my prepared remarks, that the way things are playing out for us are are very similar to what our expectations were at the beginning of the year, which was a great group setup, seeing this kind of continued, albeit, you know, relatively slow, but a continued improvement on the corporate transient side on the midweek business. And we expected some softening in leisure demand, and we've we've definitely seen that in the early part of the summer. Now, you know, we obviously hear a lot of the commentary too from other travel companies, including some of the airlines, talking about, you know, expecting to see a little bit of a bit of a pickup as we get, into August, September, and we certainly hope to see some of the benefit of that. But as I said, the way things have played out for us this year are very much in line with what we expected at the beginning of the year.

[David Katz, Managing Director at Jefferies]

Got it. Thank you so much. Appreciate it.

[Marcel Verbaas, Chair & CEO at Xenia Hotels & Resorts]

David.

[Operator]

Thank you. The next question comes from Ari Klein with BMO Capital.

[Ari Klein, Director - Equity Research at BMO Capital Markets]

Thanks and good morning. Out of room spend seems to be a lot better than expected in the second quarter. And I guess as you look out to the second half of the year, while the RevPAR growth expectations haven't changed, have your expectations around the out of room piece changed? Or were there some benefits in the second quarter that may not necessarily be repeatable? Thanks.

[Marcel Verbaas, Chair & CEO at Xenia Hotels & Resorts]

Well, it was it was thanks, Ari, for your question. It it was very strong for us in the second quarter and certainly was a was a bit of a surprise to the upside. We obviously had a, you know, a a good group pace going into the quarter and good catering pace. But the way that things, you know, fell out, there was just a good amount of of additional spending from groups that were staying at the at our hotels or resorts during the quarter. So as we look kind of towards the second half of the year, and Atish talked about that in in his comments regarding kind of our updated guidance, you know, the third quarter is is is a little bit weaker, from a group perspective than the fourth quarter. The fourth quarter sets up really well for us. We have a very strong group base in the fourth quarter. So we could certainly see a scenario where in the fourth quarter, we'll see some outs outside spending on the on the catering and banquet side as well.

[Marcel Verbaas, Chair & CEO at Xenia Hotels & Resorts]

But it's gonna be a lot more muted in the third quarter that is historically, obviously, a, driven a little bit more by leisure anyway, but also in the way that the seasonality of our portfolio sets up is just the weakest quarter from a seasonality standpoint. So so I wouldn't expect to see a lot of that outside spending in in the third quarter, but it has some potential for that in the fourth quarter.

[Ari Klein, Director - Equity Research at BMO Capital Markets]

Thanks. Maybe just as a follow-up on that the third quarter, anything on the shorter term bookings standpoint from that standpoint that you've seen slow that's obviously been something maybe called out by by some others. Are you seeing that? And then just on on scrap sale, have your expectations around EBITDA for the year changed from from the low twenties that you previously anticipated? Thanks.

[Atish Shah, EVP & CFO at Xenia Hotels & Resorts]

Well, let me let me start with the second one. The the expectation for Scottsdale in the low twenties, that has not changed. So we're still, you know, expecting to be in that range. And in the investor presentation we published this morning, we have, you know, kind of the outlook, for the next two years, provided in there as well. So in the $30,000,000 range next year and the low forties the year after.

[Atish Shah, EVP & CFO at Xenia Hotels & Resorts]

To your to your first question in terms of booking velocity and pace, I, you know, I think, you know, certainly, our guidance reflects kind of a more muted demand on the leisure side. And as we started the year, we thought leisure was gonna be, down, and I think that's that's consistent with how we feel today. So, I would say that's where you've seen maybe not as much of the transient, pickup is on the leisure side in the near term. But we continue to feel good about group and the production that we're doing, both in the year and for the future, even, you know, in recent weeks. I don't know if Barry or Marcel, you'd have anything to add on on recent trends.

[Ari Klein, Director - Equity Research at BMO Capital Markets]

No. I mean, I think you summarized that well.

[Marcel Verbaas, Chair & CEO at Xenia Hotels & Resorts]

Yeah. And and as it relates to the third quarter, we always knew that that July was was gonna be a little weaker, you know, particularly because of some of the comparisons to last year. And we we highlighted some of the strength that we saw in Houston July. Clearly, this demand is a little softer like we talked about. You know, the group demand is not quite as robust in a month like July in our in our portfolio with the seasonality that we have in our portfolio.

[Marcel Verbaas, Chair & CEO at Xenia Hotels & Resorts]

So that's that's kinda how the third quarter is shaping up. You know, Wayne, I'll add one thing to the to the Scottsdale comment that's that Atish made, which is, you know, we've seen really good results on the group side at at property, obviously. And I and I highlighted some of those some of those things that we've seen over the last last few months at the property. So we definitely have seen group business be a little bit stronger there this year than anticipated at the beginning of the year, and also some of that out of out of room spending that we definitely got in Scottsdale as well. And overall, leisure demand is a little bit softer in the in the Phoenix, Scottsdale market.

[Marcel Verbaas, Chair & CEO at Xenia Hotels & Resorts]

So that's that's offset a little bit of of that that really good strength that we've seen on the group side. So that's why our expectations for the full year, the first year coming out of renovation, haven't changed at this point.

[Ari Klein, Director - Equity Research at BMO Capital Markets]

The color. Thank you.

[Atish Shah, EVP & CFO at Xenia Hotels & Resorts]

Thanks, Ari.

[Operator]

The next question comes from Austin Burschmidt with KeyBanc Capital Markets.

[Austin Wurschmidt, Senior REIT Analyst - Equity Research at KeyBanc Capital Markets]

Appreciate all of the details on the group pace you provided. Is this mostly volume driven, just given kind of the ramp that you've talked about with Scottsdale? And I guess, are you seeing on the rate side for group given some of the upgrades to the space that you highlighted more so?

[Atish Shah, EVP & CFO at Xenia Hotels & Resorts]

Yeah. I mean, I'll I'll start. You know, in terms of the second half, it's two thirds volume, one third rate. And as we look into next year, it's it's a similar balance, two thirds volume, one third rate. And that obviously does reflect, you know, Scottsdale and picking up additional room nights there.

[Atish Shah, EVP & CFO at Xenia Hotels & Resorts]

If you strip out Scottsdale, it's a little bit more even half half demand, half rate, for the balance of the year. So, look, I I think, you know, there's there's a story on both those. You know, obviously, on the demand side, we're seeing, not only at Scottsdale, but at other locations where we've made improvements, expansions to meeting space, like at Grand Cypress here in Orlando. We're seeing the ability to drive more group business into the property, given additional meeting space. And then on the rate side, yeah, we have, you know, made investments that, improve the amenity offering and have enabled us to drive better quality group as well, so a higher rated group.

[Atish Shah, EVP & CFO at Xenia Hotels & Resorts]

So those, you know, we're we're glad to see kind of, you know, both pieces come together as, several of our properties both experience both good group demand as well as, the ability to better optimize, the group business based on the investments we've made.

[Marcel Verbaas, Chair & CEO at Xenia Hotels & Resorts]

Yeah. And in the second quarter, and Barry highlighted that in his remarks, of the 7.6% increase in group revenues, excluding group room revenues, excluding Scottsdale, the majority of that, you know, excess of 6% came from group room nights, and over little over 1% came from came from rate. Now the benefit of that, obviously, as you look at the rest of the portfolio, is that it drove so much of the out of room spending. So with more people in the building for these group events, we got a lot more ancillary spending out of that. So it's not just a matter of kind of pushing the the ADR on the group room nights.

[Marcel Verbaas, Chair & CEO at Xenia Hotels & Resorts]

It's obviously when you look at that total RevPAR picture where it was very beneficial for us.

[Barry Bloom, President & COO at Xenia Hotels & Resorts]

And strategically, it was not it was not accidental. We we worked with the properties last year, some very intentional strategies for '25 and '26 around filling group pockets where group might not have traditionally been. And that that's going to come that's gonna drive room nights, but it may come at a lower rate. So where we're booking business in the peak periods, we're growing rates significantly. But a lot of what you see in the blending of that with room with overall rooms revenue up so much is that the hotels are placing group business in areas that are of the calendar that are harder to fill.

[Barry Bloom, President & COO at Xenia Hotels & Resorts]

So we're very plea so we were very, very pleased with that. And the and the dynamic of the occupancy versus rate is, I think, exactly where we had hoped it would be looking at this year and looking ahead into '26.

[Austin Wurschmidt, Senior REIT Analyst - Equity Research at KeyBanc Capital Markets]

Those are great points, and thank you for the detail. The team also flagged attractive growth in some of your Northern California assets this quarter. Do you see that ramp continuing as you look into the booking window? And just curious if it's accelerating or just a continued steady improvement. And are you starting to see that growth flow through to the bottom line given maybe some of the expense pressures that have been discussed in some of those markets? Thanks.

[Barry Bloom, President & COO at Xenia Hotels & Resorts]

Yes. Great question, Austin. We are definitely seeing continued increase in in demand in the Northern California markets, particularly from the higher quality corporate demand and particularly on weeknights. That is no doubt is growing as it relates to kind of the tech profile, the AI profile, all the things that are happening out there. Very obviously, positive.

[Barry Bloom, President & COO at Xenia Hotels & Resorts]

The challenge out there is that it is very high wage cost market, and it's markets where wage pressures have continued probably more so than we've seen in some of the other markets. So we're doing better. We're certainly increasing EBITDA. We're doing better EBITDA margin, but it's it's really tough to keep ahead of of the cost pressures we're experiencing in those in those two hotels, two specific hotels, High Reach Santa Clara and Marriott San Francisco Airport. But again, we're pleased we're pleased with the the cadence of growth.

[Barry Bloom, President & COO at Xenia Hotels & Resorts]

We're pleased with what we're seeing on a forward looking basis, and we're pleased with how well our hotels are doing relative to their competitive sets.

[Atish Shah, EVP & CFO at Xenia Hotels & Resorts]

And I'll just add for '26, when we look ahead, the Northern California in terms of group pace is, is tracking even better than the the low teens that I indicated for the portfolio ex Scottsdale. So certainly, those are, expected to be drivers over the long term, and we're starting to see, you know, that, recovery, really take more strength, as we look forward here and over the next year. Great. Thanks, everybody.

[Barry Bloom, President & COO at Xenia Hotels & Resorts]

Thank you.

[Operator]

Thank you. The next question comes from Jack Armstrong with Wells Fargo.

[Jack Armstrong, Equity Research Associate at Wells Fargo]

Hey, good morning. Thanks for taking the question. Can you share an update on any broader changes that you're seeing in consumer behavior? Any shift in the booking window? Or are those generally stable?

[Jack Armstrong, Equity Research Associate at Wells Fargo]

And then do you have preliminary read on July RevPAR?

[Marcel Verbaas, Chair & CEO at Xenia Hotels & Resorts]

I'll I'll start us off. Yeah. Gary Barry jump in. But so, you know, we talked about July. July was, again, was a tough comparison for us based on what we saw, the the strength in use in last year and and and some weakening that we did see at leisure demand of the early months of the summer.

[Marcel Verbaas, Chair & CEO at Xenia Hotels & Resorts]

So I spoke about that a little bit. Our our ex Houston RevPAR number was up 3%, we estimate. And, including Houston, it was it was down slightly. So we definitely saw some weakening, on the leisure side over the summer, not unexpected, frankly. You know, we had, again, kind of expected at the beginning of the year.

[Marcel Verbaas, Chair & CEO at Xenia Hotels & Resorts]

And, you know, we're hoping to see a little bit more strength in August and September. You know, we certainly are hearing the same thing, I said, from, you from other people in the business that say say that's particularly on the on the airline side that are looking at bookings really kind of picking up as we get into the early you know, the end of summer, early fall season. So we're hoping to see some of that as well. Obviously, in a portfolio like ours, when you look at transient demand, it doesn't it doesn't look up particularly far. So it's hard to get a a much better sense of where we think transient demand is gonna go over the next couple months.

[Marcel Verbaas, Chair & CEO at Xenia Hotels & Resorts]

But we think that based on what we're seeing, that July might have been kind of the, you know, kind of the lowest the lowest part of seeing that that that type of demand.

[Jack Armstrong, Equity Research Associate at Wells Fargo]

Helpful color. Thank you. And then on transaction markets, you know, it seems that they've opened up significantly over the last couple of months with the readily available financing, the the reason that we're hearing from a lot of folks. With that in mind, are there any changes that you're looking to make to the portfolio kind of over the next year?

[Marcel Verbaas, Chair & CEO at Xenia Hotels & Resorts]

Well, as you know, we've we've historically always been a very transactional company to trying to upgrade our portfolio for the long term, not only from a quality perspective, from but from an earnings growth perspective, most importantly. Clearly, with where where our stock price has been and not only for us, but many many public companies, and you look at the value that we believe exists in our exist in our in our portfolio in our current portfolio, external growth opportunities have not been at the top of the list just because we think believe that there's so much more value in our existing portfolio. So I don't know that that has changed. We haven't really seen seen too much of a change in potential acquisition opportunities that have become much more appealing. It there probably are some more assets out there now than what we saw, you know, six or twelve months ago, But I don't think that the pricing has has gone to a level that external growth is gonna be a big driver for us over the next six to twelve months.

[Marcel Verbaas, Chair & CEO at Xenia Hotels & Resorts]

You know, hopefully, that changes, and hopefully, those dynamics change a little bit where, you know, on both sides where, you know, if our stock price goes up and you see some better pricing for potential acquisitions, then it may become more appealing. But I don't see that as as being a big driver for us in the short term. Now we'll continue to look at some additional dispositions over time. You know, nothing drastic as far as the reshaping of the portfolio, but clearly, to the extent that there are some CapEx needs, particularly at some assets, and and we don't believe we're gonna get the appropriate return on investment on those and maybe time to sell some of those assets. But it's not going to be, you know, wholesale.

[Jack Armstrong, Equity Research Associate at Wells Fargo]

Great. Thank you.

[Marcel Verbaas, Chair & CEO at Xenia Hotels & Resorts]

Thank you.

[Operator]

The next question comes from Daniel O'Grady with Baird.

[Daniel Hogan, Equity Research Associate at Robert W. Baird & Co]

First, just quickly, I know on Scottsdale and you have other room renovations that you mentioned. Are there other bigger ROI projects that can be done? Any up branding opportunities that might be present within the portfolio? And are those conversations that would be started by you? Or would you need to be approached by the brands for that?

[Marcel Verbaas, Chair & CEO at Xenia Hotels & Resorts]

Well, that's that's really something that would be something we'd be driving from our side, but not not a whole lot of significant opportunities there. I mean, there are some embedded opportunities in in certain assets where we can over time look at, you know, monetizing some you know, we have some additional land at a few properties, for example, where we could look at doing something with those, whether it's included adding some amenities to existing hotels or resorts or and or potentially selling some of those land parcels. But it's relative relatively limited within the portfolio. You know, on the renovation side, as we're as we're kinda looking ahead over the next few years, we don't have any really massive projects upcoming. More you know, some of the more run of the mill type room renovations that we've always done throughout our history that could be happening over the next next several years.

[Marcel Verbaas, Chair & CEO at Xenia Hotels & Resorts]

But we really expect our our total CapEx, numbers to come down, a bit over the next few years. Clearly, we we brought our number down pretty significantly this year from where we started at the beginning of the year. But it doesn't mean that we've kinda kicked the you know, like, things down the road. We we do expect our number to come down over the next few years and and kinda settle in more in that, you know, 60 to 65,000,000 probably range of CapEx if you look at the existing portfolio.

[Atish Shah, EVP & CFO at Xenia Hotels & Resorts]

Yeah. And the only other point I'd add in terms of, you know, up branding is, you know, our portfolio is a 100% luxury enough for upscale. So there's there's not as much room potentially to to up brand. I mean, we already have a very, very high quality portfolio. So that's also something to keep in mind maybe relative to to others that, you know, may have lower end assets.

[Daniel Hogan, Equity Research Associate at Robert W. Baird & Co]

Okay. That's very helpful. And then quickly, touch touching on expenses real quick. Are those pressures are you lapping tougher comps? If I remember, I think the pressures sort of started second half of last year.

[Daniel Hogan, Equity Research Associate at Robert W. Baird & Co]

Are those cost controls and other levers that you've pulled, are those in a good position and just sort of waiting for those to play out, or is there more still to to tinker with?

[Barry Bloom, President & COO at Xenia Hotels & Resorts]

There's there's definitely some some lapping of last year, I think, both on both on the wage side where where in general, employee costs are not growing the same way they were last year, and we expect that to continue through the rest of the year. Although, we're not forecasting really significant margin improvements through the second half of the year in part because the RevPAR environment ex Scottsdale is still not terribly desirable. We are seeing the benefit in the in the middle of the p and l and some of the undistributed. Some cost savings from some of the programs the brands have talked about for for quite a while. And we're seeing some some shifts in some costs related to that actually lower when we do more group business, for example, lower credit card commissions when we're driving more group business and things like that.

[Barry Bloom, President & COO at Xenia Hotels & Resorts]

So, obviously, something we have a careful careful eye on and but feel good about where we are, but are not expecting significant improvements on the expense side through the rest of this year.

[Operator]

So as we have no further questions in the queue, that does conclude the Q and A portion of today's call. So I will hand back you over to the Chair and CEO, Marcel Dorbos, for any final comments.

[Marcel Verbaas, Chair & CEO at Xenia Hotels & Resorts]

Thanks, Carla. Obviously, we're quite pleased with our results for the second quarter. We believe we've put ourselves in a position to outperform here over the next few quarters. And going ahead, we have a great portfolio, and we're really reaping the benefits of that. So look forward to updating you over the next several quarters, and I hope you enjoy the rest of your summer.

[Operator]

Thank you, everyone. This concludes today's call. You may now disconnect. Have a great day.

Participants

Executives

• Aldo Martinez, Manager - Finance
• Marcel Verbaas, Chair & CEO
• Barry Bloom, President & COO
• Atish Shah, EVP & CFO

Analysts

• David Katz, Managing Director at Jefferies
• Ari Klein, Director - Equity Research at BMO Capital Markets
• Austin Wurschmidt, Senior REIT Analyst - Equity Research at KeyBanc Capital Markets
• Jack Armstrong, Equity Research Associate at Wells Fargo
• Daniel Hogan, Equity Research Associate at Robert W. Baird & Co