Sunstone Hotel Investors (SHO) 8 Nov 222022 Q3 Earnings call transcript

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Sunstone Hotel Investors Third Quarter 2022 Earnings Call. At this time all participants are in a listen-only more. [Operator Instructions]

I would like to remind everyone that this conference is being recorded today, November 8, 2022, at 12:00 p.m. Time. Eastern

turn Please to go now Chief Aaron presentation Officer. Financial ahead, the will Mr. over Reyes, I sir.

Thank everyone. you, morning, operator, and good

consider we caution other that results from like factors call Before our described cause in these and would actual everyone XX-Qs, those you the I this XX-Ks those forward-looking SEC, prospectuses, that could and uncertainties, to including materially contains with evaluating subject projected. to are remind statements to differ our We to filings risks in forward-looking statements. begin, which

this We also property may note information, financial including EBITDAre. adjusted EBITDAre, that and call FFO contain non-GAAP adjusted adjusted level

We with a as generally in accepted are accounting that accordance prepared principles. information supplement to providing information

our but portfolio, Miami Valley. On the Confidante Montage includes excludes XX hotels Seasons today's to will call, references Resort Beach, which and our Healdsburg Four comparable Napa mean portfolio

second details earnings which and supplemental, our on have Additional in on our been provided release website. available quarter are performance our

the Bryan Officer; and today on Investment Chief Officer. Operating With are Ostapovicz, Chief Executive Giglia, Officer; Springer, and Chris us call Robert President Chief

off a some current position, Bryan capital us discuss recap And available provide recent quarter will Afterward, Robert the After your year. with answer recent our how third our team start commentary and will our second our on earning investments. of I to remainder quarter remarks, earnings last, as some operations be to context summary will will about additional the of and provide our results questions. trends. we are liquidity to the thinking

Please go to like turn would call the to I that, Bryan. over With ahead.

everyone. And good you morning Aaron. Thank

the in to the in the the leisure September of above summer onset and the relative coming rooms final third pleased performance RevPAR travel quarter, increased head with fall. are and total for our We of signs months the into since performance we with in as represents the The pandemic we in have of seen encouraging group both quarter corporate quarter that pandemic comparable levels. robust as strongest demand portfolio's the RevPAR transition

to contributed compared pricing last and which our again, XXXX. a comparable as increase XX% operators daily were able of Once average aggressively $XXX XX% increase to from year rate push and to

we meaningful greatest the rate increase our While rates at as group-oriented the grew across urban prior growth in and year. which year-over-year saw the hotels, portfolio, compared our was XX% to quarter

San the encouraged corporate there, customers in increase we occupancy Francisco San seeing on meaningful returned group by rate a growth the the recently rooms’ portfolio Francisco our and trends as we with led to and saw are completed renovation. are recent especially also market.

market the return XXXX the direction and way levels, fourth XXXX has step to is we to While a positive compared continue XX% in go the a to quarter. RevPAR that growth into right to expect to

rate once and again portfolio resort grow Our further managed what performed was to impressive above a very well performance. XXXX

third of premier quarter Including continued our since assets combined two combined $XXX of rate. a to they average quarter over rates seen season country and these a XX% a wine our highest the RevPAR daily total portfolio ADR up Our of quarterly $XXX have of at made acquisition. hotels $X,XXX, two generated occupancy we generated third

XXXX comparable and beverage increased strong in food and which from levels. once from banquet came the contribution quarter portfolio significant group In spend. benefiting saw business during related revenues again our revenue, Non-room exceeded we

for XX%. to compared in room up comparable the Banquet XXXX, $XXX QX sales portfolio per was and in $XXX AV group

all build year. sequentially, Our maintaining trend outlet quarter-over-quarter, positive spend we've continues to seen growing the

activity has with in several strength exceeding hotels larger of group been encouraging our pre-pandemic The levels.

XX% with than same higher, in XX% in room higher performance quarter nights, higher Renaissance even the Following group has a the strong contribution and an quarter QX, XX% XXXX. Orlando group rates, catering better third

XXXX times third per XX% in with XXXX. than the many in higher. been business higher hotels, more group had and group group the than night, catering Resort Hyatt Regency our premium room Beach has Francisco, to volume up year-over-year contributions Wailea banquet recover slower San generated house of spend XX% which significant at Similarly, quarter XX% year, compared to in than nine accompanied to by last a

saw in also our revenue, and to destination facility increasing of We fee meaningful occupancy programs more rolling out of a levels and increases hotels. product these

of with industry which QX levels, indication is in our historic returning fees normalized Cancellation came to that more a in pattern positive pre-pandemic meeting is activity. a consistent

out-of-room portfolio approximately in of available generated total room $XXX. revenue spend per an our additional $XXX a quarter Including RevPAR the the total of for

in of the came lower total for XX since RevPAR while occupancy remaining XXXX the exceeded For than first comparable time the XXXX. pandemic, at $XXX and onset portfolio, the points

continue navigate side, creative to look inflationary reduce to On the ways the for and environment we expense costs.

of have costs. with managers growth and food our have worked moderated to to labor drive to optimize our rising and menu costs. in higher Wage has areas efficiencies pricing review X% We and X% but beverage to been range mitigate offset operators offerings our certain costs remains in with to expected able line help somewhat

been winter. recent and investments in efficiency that since energy XXXX. now expect completed online makes persist we which this phase, phase and it on much more our solar This installation on we the are to the in In our second Utility costs have first worthwhile. likely saved of last panel rise through was has process Wailea, the come $XXX,XXX will nearly year the

of some our today, also you intensity and As has release, costs. water, and benefit only updated we to details waste have initiatives environment report on our energy, earnings to on also energy seen we reduce not which additional to our the are ESG working the overall may but other published decrease our of in use renewable increase

is hotel even portfolio an quarter, points same XXX generated quarter achieved the in quarter, same our activity that pressures, our as forma for of pro margin lower EBITDA strong a is performance. the XXXX we our two XX below margin XXXX with cost comparable in XX%, occupancy. during points exclude significant the basis If in Despite was XX.X% portfolio our EBITDA hotels hotel the with only of which renovation which the very

profitability, to shifting as operator's to return this are levels. our ability very hotels EBITDA of increasingly occupancy level While pleased deliver to portfolio maximized normalized is our with focus we

to turning segmentation. Now

Comparable group Portfolio represents XX% same of XX% total amounts the average segment group comprised quarter nights XXXX. XXX,XXX are with demand. in that and approximately volume higher room generated our in X% group roughly the night’s the total of quarter Our than The room historical rates

rates. current all in periods the is QX and room our comparable books QX portfolio put was higher Group at and which for production on for than XXXX we nights, XXX,XXX in future more XX%

accounted in roughly comparable our of nights room at XX% for XX% came levels $XXX in the XXXX. In quarter was in quarter, total than same the of that terms which higher the saw of transient we pre-pandemic rate business, and

business We a to there starting of consistent aerospace Beach, coming return hotel travel corporate has up seeing Long segments. travelers and are see The negotiated materialize business at consulting is also Renaissance XXXX. government, revenue XX% been from more with At a cadence. transient growth regular to

of significant Hyatt at leading contributing negotiated Francisco, corporate are XX% to Additionally, from approximately with San QX. at up Regency nights to business levels participation and XXXX XX% accounts higher accounts technology transient volumes

have reflect to quarter performance see our to an accounts volumes strength the about adopted just levels Wharf XXXX uptick hybrid short-term contribution for we what outlook or fourth lead the have from key Recent model. October, Based office with in in quarter. remain hovering saw booking below and a in corporate group encouraged activity events. we sequentially higher trends the third Marriott Long also a Boston returned business as travel continues on and

period trend Our that group XXXX. for average pacing room nights group pickup approximately This If quarter groups XX% in XXXX. the higher is pre-pandemic typical QX to the down fourth guest same at booking have XX% our pace for room that underscoring we of quarter full seen Renaissance the at where of XXXX. the imply from than quarter pace X% for renovation time down levels fourth time to in closer overall only of events. in swing, amount, revenue revenue the is fourth higher in exclude only the is the our is the we would than portion their group X% an rate that DC this was pickup are Group

booking Hilton and San is of both transient and travelers. our Bayfront the leisure time Boston from the cities continuing continues We increased benefit ahead citywide corporate Diego at both pace XXXX. fourth results These strength. group into group market activity drive and same compression, demand calendars which with have Fourth from in in and quarter pricing Boston in to strong is group active quarter. seen into translating

fourth the paces At group in Boston XXXX quarter rate volume. Park both in time same Plaza, and outperforming

several has trends. and is positive mentioned market sold I our additional is we Hyatt the and Regency earlier Francisco nights as in As fall. the remarks, business the move at Embarcadero showing my In October, into out travel materializing group San increasingly

is finished our located rooms’ Our feedback. earnings lodging the expect in growth we renovation product fully hotel coming The city that generating further and as long-term quarters. market the remains contribute a recovers now will market the desirable our well portfolio's great is complete to and guest

We Key both sustained little Renaissance were Miami fortunate remediated. Edge from West most damage was that our of and water has Florida damage, Hurricane hotels which experienced impacted. been and minor Orlando in wind some Oceans already not Ian, while

work. $XXX,XXX quarter expenses We restoration expect the incur in the approximately fourth of to to related

to in displaced hotel physical storm the September to to I'd up We quickly Oceans leading at after $X thank our and to guests. storm. estimate Edge Orlando shortly to reacted teams and revenue hotel cancellations in who the primarily that the assets storms effect accommodate the approximately on impact and October, due Florida resulted like of in protect our million minimize to across in and

portfolio. continues could we are strength last trends seeing moved occupancy out to some rate we we profitability of we the half and into While guideposts full When the provided the about you positive segments, markets the we recovery quarter, how across spoke thought across as back vary year. and our our year of play with

consistent us to additional remain expected with put information this those in those our performance to position thinking, should ranges. higher Aaron provide quarter end our of context. third expectations the will help into While achieve better the Later, indicative current than some

recently current portfolio. we capital quarter, Robert and flow additional and the we long-term made combination will enhancing value share portfolio potential Miami. our believe we investments in some our our which value the a in provide During of growth projects, mine cash resort of of near-term acquired our creatively planned repositioning and for will details initiated further also to

with over return $XXX of will QX, of million a to a price we our dividends repurchases to activity additional share $XX the In completed brings This we repurchase our of an million investments, $XX an total to capital share, addition million for this NAV. Together, estimates at of discount meaningful to since $XX.XX year. the average year-to-date published QX and shareholders end also per quarter. second

up, fourth sum the we seeing we the recent portfolio. encouraged are To as move we of things by our into trends XXXX, are quarter across

in corporate urban well robust for assets demand as quarters our and travel leisure group to the continues Our located properties. events catch continued oriented up the already resort at see growth with demand business coming and will

Sunstone portfolio, that our proceeds and to allocate owners. recycling returning our to formula in growth believe continues our new value is shareholders and investing long-term opportunities We share capital, sales dividends. capital winning Additionally, will repurchase provide to actively this into a through

additional with And recent Robert to some over and turn thoughts investments. upcoming I'll capital to on that, our it give

Bryan. Thanks,

our for provide review the Oceanfront and off We plans into have to in start strategic after of of half several initiatives portfolio. an with the then of underway the acquired in investments renovations we first a closing our on number I'll portfolio of on year. and dispositions acquisitions pleased some the and making other I'll update across recently are a be Miami, Resort our

Miami is design repositioning Our Confidante in construction be will the stage, approval Beach middle the and soon of of and underway. the

of is the to beachfront the market's superior debut to high year and when Andaz will take hotel advantage renovation location Beach. and of following in its half the next conclude XXXX begin great as asset The The and will the investment the season scheduled footprint. first transform Miami better

hotel the the the retting, the discuss upgrading with will guest pool outlets, you reimagining the relocating spaces. including rooms, the recreation expanding all aspects renovate backyard we and call, on and lobby we As modernizing the the beverage food areas, event meeting and of suite prior and mix,

while will compete nearby we displacement the to nature ADR all-encompassing the able is hotels. With will completed. year of property the luxury these repositioning, believe we incur growth the enhancements, of anticipate better significant with work Because significant next and be

XXX,XXX at However, a is hotel in we where of generate X% great and had an post renovated a the attractive very type on per of in assets have our basis key approximately excess well will all-in with know repositioning, success key in own luxury X% resort to to we expect market $X the similar This are per oceanfront total yield a and the investment fully well of we valuations million. past. investment for

In even up Beach, investment in market is ownership, has that been have supports the which rate our the a months we is the process rate its started rate this condition. to of resort’s in impressed the our a push before grow to Miami Year-to-date, and is year-over-year up its thesis there strong to XX%. respectable we XX% ability renovation performance rate and have well initial even begun. the with This ability compared current

to to San meeting progressing the and earlier, mentioned positive. completed, Hyatt the and the As in hotel is feedbacks market. from Washington initial Francisco Work is DC room’s of is also the return the continues shape, Bryan brand. very the conversion we to space Regency is Westin and of The on Renaissance group sales great occupancy completed the managers its renovation

The underway renovations currently the of rooms before third year. end the project completed and year are with entire be of quarter the the to by will expected the start next lobby

upon the renovation incur displacement, to contribute this hotel growth the project value we will and of enhance While incremental some completion.

a Given it the repositioning where a the see Renaissance Westin, DC also we the forward a are lists Beach the reposition we brand Renaissance will expect and positive and at to Long with we conversion to response renovate hotel as moving Marriott. from

conversion the strategy allow enhance to to on the as hotel of this its but business, for ultimately are an expect in Hotel. project, grow stages earnings compete better will and early the We value Marriott

guest The mid-XXXX. slated M Club, in will occur additional add of the approximately the is rooms, part As lobby. project, conversion invest we the million $XX an space an and renovate meeting to to reconfigure

other portfolio of and grow additional of We our in are details constantly creatively enhance and for to through both value and investments our ways looking sharing projects acquisition future quarters. be internal the we’ll upcoming

With to turn over that, it Please I’ll ahead. go Aaron.

Thanks, Robert.

approximately cash total full of nearly the including our which on $XXX had million credit cash end at of As the We cash. together million restricted we to liquidity. $XX million hand retain $XXX equivalents capacity with facility, quarter, third and on of cash total of equates

We’re will maturities sector. Hilton of we Once within completed year our of that in in the San have secured option the by the the extension the not balance Diego Bayfront, on which the quarter. done, in process will exercising mortgage debt and next be the loan sheet current one any is our will remain strongest

Shifting and corporate to financial results details supplemental, and our the quarterly growing which our initial surpassed our of demand. travel expectations full continued provided leisure our are in and and release reflect strength which the group results, earnings

$XX $X.XX million, share. FFO for was EBITDAre Adjusted third the was and quarter per adjusted diluted

in work balance of $X Ian the QX. third cancellations million September impact revenue displace The in include was Westin the that conversion revenue approximately the quarter Hurricane half in approximately in Washington million with results related $X and displacement we estimate DC of to from

you indications we as When occupancy fourth last broad for quarter, moved the we thought into with could rate year we and quarters. full and some we third provided transpire how profitability spoke

we While discussed. those in third within current of be we upper to would half fit are in expected the parameters generally thinking better likely shall now are our ranges quarter the performance suggest than the

XXXX. but anticipate so comparable what far XX compared on $XXX excludes we our of the October, at XXXX, year have up will resorts In points comparable finish includes to Miami down the as XX%. occupancy our RevPAR we our likely a to current country of XX that Based $XXX which an points ADR generated portfolio through seen of Confidante portfolio, XX hotel wine occupancy made Beach, two

This Omicron full variance by to is year occupancy which the quarter, in occupancy led skewed XX impact the lower. first points

and third points XX second points. down the While to only were quarter XX

in the XXXX. in year-to-date same comparable As growth relative portfolio to period at the for supplemental, we noted our rate XX% the is

representation the year. for This is full of likely finish a we to be good where will

compared could XXXX. Taken that comparable to year in full high-single portfolio this would imply range of digit be as together, the a down RevPAR

corporate that our is earnings. expectation approximately the year-to-date is full potential year of comprise current of $XXX XX% likely to million Our adjusted EBITDA

quarter expectation we results of in the third in incorporates a with This quarter. the our expected shared and half you last than indications better upper as

noted expenses release in the from this to displaced we approximately in As is our shared of is reflected in $XXX,XXX in Ian, expect morning. earnings incur million to earlier, numbers which we a storm, we fourth quarter $X result related also the of work approximately there as October preliminary Hurricane the revenue restoration and

as in DC. additional Westin we our we progress make displacement to hotel conversion quarter on In at a addition, experience Washington the fourth some will in further the

Now dividends. turning to

Our a distributions for for a per $X.XX preferred Board and has this the the authorized a series declared fourth common G, quarter, H share also routine dividend I and securities.

now And questions. with that, can open to we the call

able as question. are we as ahead. many that please one Operator, So go to possible, that ask please yourself speak you limit we to participants with

Instructions] go [Operator from first from Please Smedes comes question Your you. Citi. Thank Rose ahead.

good Hi, morning.

morning. Good

Bryan, just more bit about the two little I properties. country you wanted wine I ask a guess to specifically

We I can combined you wondering think think worth on – results essentially just to the and when have the around you investment $XXX a more I’m year’s meaningful that now million? get of they returns start of do

lot I’m think maybe just out It interested you maybe over plays of is. rate. not year. the but like there’s seems in occupancy? next kind $X,XXX this how does of out? upside? a Do it I specifically taking – I’m be you wondering just And Four to of guess it got for more a there’s is think matter Is like the Seasons, a there it daily upside there, costs bit

this When the summertime is of and to as ramp to in continue the what wine that we see Thank have saw would they and the started look during country summer. back the you, normalized both we market at Napa all year to Sonoma revert they resorts, year absolutely. you the in seasonality Smedes. Yes,

look to had of fewer story. the luxury summer, different very If a bit and back strong due a This options Montage to primarily that driven summer summer a that you occupancy QX market little and very, available traveller. is very last year, strong to luxury was

seasonality could the brought years, the A especially year. market. go – available Italy were European, luxury traveller and available destinations U.S. this had wine lot that prior weren’t to they European You international like France or back of which

and Additionally, in the to it a continue XXXX. have going it for they more travellers on making focus to this been we the have Montage hotels the leisure established hotels making both and customer year, little significantly have a probably now, will and U.S. beyond. bit, come But on to done exacerbated the Where a at they than and challenging so for higher strong has business growing international we’ve which more bit into this internationally do Seasons than attractive this U.S. longer, dollar ahead to year the continue farther been next group Montage to both – have group put the of what of resorts their open to the resorts we amounts look was when significant the books it’s Four process. of little XXXX able base,

ancillary business these it side. transient see that hotels, plus night. we And group spend rate, of while lower And per $XXX lot with group very is it rate of much the than and than not on remember the transient comes lower upwards the so rate at the it’s a room a good growth group

very And so profitable business. it’s

in to we then then is are. the transient rates be into and the these would $X,XXX this night, than to ancillary go that look getting able point high impact also And group at and we that we your time, the right thought profitability our… where next hotels be there, significantly a rates that base keep to spend rate allow as compress of and as that but on transient higher maturation expect as getting year, they is when part definitely the it will up so at the of And we ramp the hold

get think my know for $XX on investment. mean, of and we’re to things just just I kind do second? they returns? I on that’s questions Bryan, returns it’s sorry. do if cash reasonable just the sort Is [indiscernible]? do interrupt ramp And you the range? trying can What longer But I a sort reasonable a expectation to all that of you million really what lot you probably because of $XXX I’m mean, a to is do I is, million at guess there of peak? one have million, limited a these fit I the question you think to know cash I be $XX timeframe I – one.

kind was yield acquired X% type would investment. knowing I XXXX, X% on also timeframe. bit understand to – this upper resorts the takes than these our hotel and and It’s Yes. hotels. that up little XXXX our value was expectation much remember type when this we better of a their get we of much consistently this longer when hotels, standard that mean, also at acquired it’s they a hold asset, to more That like of look NOI timeframe, that to ramp to upscale you luxury

the hotels. are the dependent are most capitalized, turbulence because in price assets. on far of the the debt through for to at this be fluctuations especially buyer transactions and better are full and seeing to debt look which few you to That’s and very the willing markets, transactions between scarce luxury less have can happened see near-term luxury market, due that in you’re tends a pay If

was That’s associated very has were luxury always experience. with up. mark Seasons hotels important is a than of the where we when Remember, they winery originally question hotels. something hasn’t acquired these we not long-term strong look to the cash absolutely That a a it. to changed on profitability. And were that bit. ramping cash stronger it at our return on that or we open, our view was as hotels these Four guest value The have And winery overall probably these is when so

which towards a close – working to which We is next breakeven year, have feat. was breakeven major that –

is these so way returns And are have we what and absolutely we acquisition. they have expected that done achieve de-risked assets the to we their at on

question next ahead. Pfennigwerth Evercore go Duane from from Your comes Please ISI.

Hey, thanks.

it your that’s remind renovation relative I complete. you when touched Just to you on XXXX this you and just in about us call, the EBITDA expected timeline, the know can year? but And to be us Confidante, would remind think a contribution on what

Okay. Good morning, Duane.

So Confidante, of but of areas acquired was when the would of the second steps those have non-guest regulatory renovations in actual kind end the plan some year, done the we the the take renovation a bit. towards repositioning there’s there have in the some happen majority happen facing that beginning in of this of historic – next Miami, would year, in the board and half the season. and to through after go next repositions of little for year you high And that the

in And year. the next we so major construction and something of are will half start working second that that now through is

period. year public lost EBITDA space Our our view was the all and that would season some we displacement pools breakeven the having would acquired time – basically during that the then when expectations on as high that a hotel, hotel the next and rooms and renovated – during are come in it be obviously being on for the there that was

The hotel is year. this very performing well

country. year same Miami in do that million has grow the saw summer market to rate in of even softened grow or the in EBITDA some wine demand we able But for the though its million rate some the continue reasons this condition. of of $XX $XX to current the to hotel’s to going We’re – the

the able hit to it given of make the in able been it about half. so very are to beyond and But achieve in be repositioning lose then half We will our excited all money it’s will – us. once expectations money expect have is next and the to year we first debuts we what far, this second

Bellisario Your Please next go from Baird. question ahead. comes Michael from

Thanks. Good morning.

Michael. Good morning,

stock did you acquisitions terms of buybacks, maybe and helpful. lower, Thank also think stock, view earlier you in amount your price buybacks cadence On less us year. you’re today seeing capital pace bought what could on Bryan, just but a still allocation, the and those bought about be versus topics and dollars your in update back of the how was around you then Any than you. color would you of you

tends really capital using our of look recycling we capital And together capital balanced we at the Sure. when and alternatives. to investment, is have put and allocation right Capital comes The year all the obviously to and at balance it look at at as our is way capacity of same being some stock as capital higher look investment look we to return And then through is share that the sheet, try also able we capital successfully we’ll we approach. be to long, balance shareholders. that is some and of portfolio repurchase. we a internal to trick want our of the done kind – to we on is take look lower, allocate look it way to capital at the between we puts returning our more on emphasis return

And adding and renovation when look are the we the at in Westin conversion, pool return good San Francisco at did we look Hyatt, so the rooms projects. Wailea when those we at

come And some so only liquidity markets, of see to we enough sure the not make given and have fall have back – near-term also opportunities. when we’re liquidity of maturing take things we debt mindful advantage we then we available loans want years, that make our starting either current out want deals capacity, that to to but of to we And look do with debt while come the liquidity repurchase ample over in contract CMBS have shares, the seen couple and to we’re we sure market. next to at our

dividends, interesting to relative repurchase that if is that to will something the do some capital you’ve also. very capital comes think the look been we’ve investment return attractive. When to return see so to But other appear and that capital near important It’s acquisition and seen as it’s continue share But there demonstrated year. we’ve do. available think is through balance way dividend something something we to will that a an options. to And all cap liquidity and market I to to active we opportunities – it want it having the size to to we in our look that continue it’s be we that it as medium-term does and and do may we with something we’ll to that have balance – is of the

next comes question Jefferies. from from go Your ahead. Please David Katz

Afternoon everyone depending where Hi. good or sitting. you’re morning,

whether So at just leverage leverage. up would an returns and words, of activity a range? think other as look return means about into are more to leverage buy raise sort stock target you getting as that that to or of or a way back capital you would wanted the capital the I In

leverage. I XXXX. group be as plus still you are Yes. hotel leverage, good hotels I call a we we – And are of year. preferred going repositioned. of compared our is at we next it’s sitting hotels good where let’s on – basis, And are if especially it’s that’s Well, of this big lot a have somewhat debt year in EBITDA, question – a we against it But to which we at, expect our of cyclically of that have growth X.Xx normalized and we with QX we’re are mean, given in as occupancy the impact start it hotels up Omicron still – to look QX and some and a have behind many in to ramping a given our think

higher which balance sheet capacity shuffle. and acquisitions Confidante San with – than assets. acquire it XX% our X.Xx of balance optionality our where give a leveraging where capacity lot hand Diego, the assets, also a associated We cash the to debt our was is that’s a ago But was to gets the and acquisition. and Chicago it sheet and on sometimes a we make in the lost had use recycled did to Hilton ample some of year but of was then of leverage used

XXx this sub multiples at performing year is hotel was that EBITDA fantastic where given at a also acquisition. But

So our of appropriate the were back we’ve this an – into we to going path said level. and we using already sheet started do balance leverage bringing down

out look that’s as be absolutely leverage. of forward recycling assets, the repurchase share will attractive additional way has to options in we capital more done even it be we we’re and going that very would result as there with allocate if So one will come leverage, only where because will continue it forward and the

the plan, it’s we’re that’s been the what has executing It So been plan. on.

but as think don’t we before, the lever either. to the levered going we’re group, And so, said we’re to not also lowest the highest to we going be be anymore

that to gives so investment repurchase, through us through And capacity own portfolio. allocate acquisitions, it in our share through

from Anthony go Barclays. from ahead. Please Your comes question next Powell

into could activity? looking got I Morning. dispositions Good like acquisition two morning, potential at you good Are portfolio, the to candidates. the additional look disposition and or hotels that I maybe on along those Hi. a out recycle as sell think – question lines least on buybacks these they at plans stick in

that you and question to a you portfolio. at bottom there and are pretty in list is attractive do portfolio say more portfolio at of the than And now pretty the down granted When look if to the need the portfolio you go our is, solid I we’re would sell? still XX is hotels pretty, – our hotels.

this an exited of. asset, disposing forward, look the wanted that to of up point an everything life done in we’ll I an to is that come our selling markets life of cycle asset the investment we has say it or end. the at assets the would think asset cleaning When at we portfolio, cycle comes to be So going is absolutely we’ve we out And that what opportunistic. if

portfolio, an any it going asset, could for asset continue When of future that something investment be criteria the first can of our portfolio or use. we’re a in the to place would – do portfolio dispose of medium-term. in be now look we the either asset any in higher, that our the asset better at meets any a in think where meet the there all, grow it, looking it one, and we to we could return is there asset to at on probably if than invested capital should So, to criteria has our than least

better can willing Someone is capital find and aggressive that very it pay to for redeploying growth we price a by elsewhere.

that go? things But forward us This and a left to the going opportunistic. provides not. of as on portfolio. everything a as need optionality – Absolutely are bottom It is far fantastic purely there be lot will

Your comes go next ahead. question Truist from Gregory Miller Please from Securities.

question my at the like and XXX two margins I bps about fell assets. the The Good Napa to was the like of Hotel – to about bps on looking Seasons I properties And from Montage XQ. morning. Thanks. fell focus the between and XQ margins Hi. X,XXX Four also to Smedes’ read. I’d similarly

Seasons So broadly similar Seasons your from insights us perspective one-time that there’s I’m the Thanks. specific the might that that modeling margins at in just Four or events? for Or if if XQ anything greater Four for expectations? more unusual in any a happened XQ were provide to maybe the curious

first the do you hotels When year. And line mean, and traveled third the lot two, these not option look transient that travel of that not guests costs. a years a was these going having something Europe to is have two-plus year at of quarter bottom our of hotels, all, for to internationally, people every I the or single after high fixed

and what And QX so That's that's obviously there, that understandable. quarter. it's market of wanted, last demand we pent-up out year, but saw not its would in demand while way of we some worked left I – mean, fine, this the we and pent-up

with these of a fluctuations margin fixed for off their half back in. this look really going full hotel. at and brings rate more limited have service As the see because going than cost and this occupancy added ancillary group profitability, in hotel are to – that to so guest margins or year, that attractive the very it hotels have at of a And lot next when year forward we which look It like into that important it that the expect. guest a we because in falls you're that of is they needed but that's extra spend, brings a service adding why you would in and the is brings we business the

see day, nature of swings the on this upper running view at so our upscale that It's value just our trades – is like you're you'll is asset of the of trajectory but And and highly the asset like as some this is same. asset does more down, asset, this this end view we've of up and does. not the the of the and type of the type and trades fluctuate mill desirable seen it value in recent on

question from next Compass Your Please comes from ahead. Floris go Dijkum Point. van

guys Thanks for taking my question.

morning, Good Floris.

question I I question I I the morning. – or on But Good ask ultra – on exposure. won't a your your rate on more specifically balance and sheet luxury your luxury won't you the had promise hotels. your on floating

floating you're will, of bar, you rate are floating You San what Aaron, forward comment in certainly be – the you floating your potentially highest exposure, Hilton. you also have bit my could if fed in a But going the said going to and rate your some for the of if thinking debt coverage mean, sort that I the, on hotel on address universe. to could about Diego your if reducing mentioned the in trend little caps that there you're mortgage exposure how of some place? how plans or exposure, Maybe rate as I you raising could XX% think keeps your

question. Sure. you're so Floris, Yes, thanks right. for the

debt $XXX had total end third of was which fixed fixing the we XX% or as been was the or to quarter swapped so balance roughly million of So of XX% had floating. of

rather debt mortgage you're over number years of a from Our to years. Bayfront floating rate the rate last on X.X% attractive referring interest for environment. benefited And two loans a have the that was effectively

to of the a rates of who for expense to up rate we move rising any move as in everyone going else see exposure say going we're is has So backdrop period. degree and into just here floating

Yes.

mentioned, Bryan have leverage conservative As we rather overall profile. a

overall we you in – lower rate on overall other the debt floating So sector. it's have might do across much see exposure, than while the XX% spots load a than

the pretty, we're overall well to environment. think think, I rising I with positioned So rate deal

all mentioned, as so of out or As lever. call of quarter we were Bryan X.X-ish the in end the times

So of do now. quarters. at try trajectory, anything it's the think the and where hedging it's they're broad in conservative a over are interests next kind I where viewed of the locking and I And already rather where think right any balance to time based terms be sheet. on don't expected at now of scale couple in to

in rates exposure are balance the just interest and months the rising and way. how our portions environment. – the it some rate just our So to that actually our coming interest level overall if maybe is sheet see weighted at, rate we'll interest to and our you about – withstand think I leverage – there some positioned of keep overall transpire the But and some a might window eye hedge at be average lock look incremental to think that over in well out call you our of actually actually pretty preferred where low-Xs our is of

but it and see just here will add tell. some there real to if our keep swaps makes sense incremental it'll we'll So time

We said, term loan. swap in in the – Aaron don't term We can can amount. both it's of have do can like increments amount time. and entire And we we out it do it something that Yes. over gradually. We a to can dollar in do

it's levered X, have that It we like So provides have. our things at a you why looking it optionality probably we and now we're and be Aaron as with too sheet But if leverage looking flexibility. where we that's times something would it, is, balance said at X were differently.

Please next ahead. from Your Morgan. comes go question Instructions] from Daniel [Operator Adam J.P.

curious strength taking if given for likely what the a year think question. weaker environment? related I'm be can non-room thanks much Thanks. be next sustained you Hi, macro will

of into we're have When the group. actually business and our selective type out with take there very room as demand, question. feel look next strong we this at strength for when you group more as good look look a we and year it year, has some on year Wailea, transient next group of at about becoming let's the hotel we example. and hotels, good When a more where at we our and we this year, gone that's spend get It's because

have there of has be and in some Diego San more additional thing spend. Orlando, group it'll that So We're taking a groups that have of we the seeing little capacity, quality we're the with same that combination bringing better a a while spend. better a hotels in in so in bit

at you and still base. below that But other bring are making you still still well – composition And then spending help in us that's want – that in of being that look this is XXXX, in lot you That grow. growing is were hotels in that getting And business. the very that we're of selective something groups it's room spend group that that the we sure are will it's of to a when that where type really more. there's year, base of group group to more those – the continue

the There the CEO closing are no call for further to I will questions turn at this time. Giglia, over Bryan back remarks.

interest look company, the to Have we for good you thank Well the Great. in everyone a and you forward the day. conferences. and support and upcoming at Nareit seeing

call. conference today's concludes This

now may you. Thank disconnect. You