Apple Hospitality REIT, Inc.

Before we begin, please note that today's call may include forward-looking statements as defined by federal securities laws. These forward-looking statements are based on current views and assumptions and, as a result, are subject to numerous risks, uncertainties, and the outcome of future events that could cause actual results, performance, or achievements to materially differ from those expressed, projected, or implied. Any such forward-looking statements are qualified by the risk factors described in our filings including in our 2024 annual report on Form 10-K, and speak only as of today. The company undertakes no obligation to publicly update or revise any forward-looking statements except as required by law. In addition, non-GAAP measures of performance will be discussed during this call. Reconciliations of those measures to GAAP measures and definitions of certain items referred to in our remarks are included in yesterday's earnings release and other filings with the SEC. For a copy of the earnings release or additional information about the company, please visit AppleHospitalityReit.com. This morning, Justin Knight, our Chief Executive Officer, and Liz Perkins, our Chief Financial Officer, will provide an overview of our results for the fourth quarter and full year 2024 and an operational outlook for 2025. Following the overview, we will open the call for Q&A. At this time, it is my pleasure to turn the call over to Justin.

Good morning and thank you for joining us today for our fourth quarter and full year 2024 earnings call. I would like to begin by recognizing the courageous and dedicated teams at our hotels in Southern California and extending our thoughts and prayers to everyone impacted by the recent wildfires. We are fortunate that our hotels did not sustain any material damage and have remained opened and operational. As recovery from the fires moves forward, we will continue to support the ongoing efforts of our operating teams to care for guests, associates, and their surrounding communities. As expected, travel trends across our portfolio remained strong during the quarter. Driven by steady improvement in business transient demand, continued strength in leisure travel, and muted supply growth, we achieved comparable hotels rep part growth of approximately 3% for the fourth quarter and more than 1% for the full year, as compared to the same periods of 2023 respectively, driven by improvements in both ADR and occupancy. While business travel continues to be the primary driver of overall growth for our portfolio, leisure travel demand has been resilient. Contributions from recent acquisitions along with continued strength in ADR and moderating expense growth enabled us to achieve strong bottom line performance for the quarter, lifting full year 2024 results. Fourth quarter adjusted EBITDA RE was up approximately 7% and modified funds from operations was up approximately 6% as compared to the fourth quarter 2023. In January, strong performance from our hotels in the broader LA and DC markets offset weather-related disruption elsewhere. Our LA hotels have continued to perform well in February, and we anticipate that incremental demand from insurance and reconstruction efforts will continue to bolster performance for several of these hotels, at least through the first quarter. Supply-demand dynamics for our business continue to be favorable. At the end of the fourth quarter, approximately 55% of our hotels did not have any new upper upscale, upscale, or upper mid-scale product under construction within a five-mile radius. We continue to believe that limited supply growth in our markets materially improves the overall risk profile of our portfolio by both reducing potential downside and enhancing the upside impact of variability and launching demand relative to past cycles. Supported by our strong operating performance, we continue to pay an attractive dividend. During the fourth quarter, we paid distributions totaling 24 cents per common share, bringing our annual payout to approximately $244 million, or $1.01 per common share. Based on Friday's closing stock price, our annualized regular monthly cash distribution of 96 cents per share represents an annual yield of approximately 6.5%. Together with our board of directors, we will continue to monitor our distribution rate and timing relative to the performance of our hotels and other potential uses of capital. Our disciplined approach to capital allocation and portfolio management has defined our strategy throughout our history and was especially evident in 2024. During the year, we acquired two hotels for $196 million, sold six hotels for more than $63 million, repurchased approximately $35 million in common shares, and reinvested $78 million in our existing portfolio through capital expenditures. While the transaction market continues to be challenging, with industry deal volume remaining at historical lows and down meaningfully year over year, we have successfully executed on select asset sales in ways that continue to optimize our portfolio concentration in specific markets. Proceeds from these sales were used primarily to fund share repurchases and reduce debt. During 2024, we sold six hotels to five separate buyers, including 122-room Hampton Inn and 126-room Homewood Suites in Rogers, an 82-room Spring Hill Suites in Greensboro, a 90-room Courtyard in Wichita, a 97-room Town Place Suites in Knoxville, and a 117-room Hilton Garden Inn located in Austin North. for a combined sales price of more than $63 million. More recently, in February of this year, we completed the sale of the 76-room Homewood Suites in Chattanooga for approximately $8 million, and we are under contract to sell our Spring Hill Suites in Fishers, Indiana, for nearly $13 million. While pricing for the individual hotels varies, as a group, the eight hotels will trade at a sub-7% cap rate or 12.4 times EBITDA multiple before CapEx and a 5.2% cap rate or 16 times EBITDA multiple after taking into consideration the estimated $24 million in required capital improvements. It is noteworthy that shares repurchased during 2024 were priced at around a one and a half turn spread to recent dispositions and over a five turn EBITDA multiple spread after taking into consideration required capital investments. Recent acquisitions continue to contribute positively to our overall portfolio performance. The seven hotels acquired since June of last year and open for the full year produced an unlevered 9% yield after CapEx on a trailing 12-month basis with continued upside. Our Springfield Suites in Las Vegas yielded 10.5% after CapEx for the full year, and the AC in Washington, D.C. yielded 8% despite a softer fourth quarter, which was anticipated due to the presidential election. The recently opened Embassy Suites in Madison underperformed our expectations in the fourth quarter, weighing on overall portfolio results, as securing group business proved challenging during a period of seasonally low occupancy for the market. We continue to believe in the long-term potential of this asset and the Madison market more broadly. The hotel management team is working hard to optimize near-term performance, and the booking position is looking more favorable beginning in the second quarter. We continue to actively underwrite additional opportunities and are well positioned to act where we can achieve attractive yields relative to other capital allocation opportunities. We have one hotel under contract for purchase, Amado by Hilton, which is under construction in downtown Nashville for approximately $98 million. The asset is being developed under a fixed price contract and we anticipate acquiring this hotel upon the completion of construction late this year. Since the onset of the pandemic, we have completed approximately $325 million in hotel sales, with an additional $13 million under contract and expected to close during the first quarter of this year. And we have invested $1 billion in new acquisitions while maintaining the strength of our balance sheet. These transactions have further enhanced our already well-positioned portfolio by lowering the average age, lifting overall portfolio performance, helping to manage near-term CapEx needs, increasing exposure to high-growth markets, and position us to continue to benefit from near-term economic and demographic trends. Our recent acquisition and disposition activity, along with our 2023 share issuance and recent share repurchases, highlight our ability to adjust tactical strategy to account for changing market conditions and underscore our track record of acting on opportunities at optimal times in the cycle to maximize total returns for our shareholders. We actively seek opportunities to further optimize our portfolio, drive earnings per share, and maximize long-term value for our shareholders. During 2024, we invested approximately $78 million in capital expenditures, and we expect to spend between $80 and $90 million during 2025, with major renovations of approximately 20 of our hotels. These reinvestments in our portfolio are a key component of our overall strategy. and ensure our hotels remain competitive in their respective markets to prototype EBITDA growth. Eleven of the anticipated projects this year are part of multi-year franchise extension agreements. Our experienced team utilizes advantages of scale ownership to control cost, maximize impact of dollars spent, and implement projects during periods of seasonally lower demand to minimize revenue displacement. As we begin 2025, we are confident that with our portfolio of high quality rooms focused hotels, broadly diversified across markets and demand generators, the strength of our brands and effectiveness of our management companies, the stability and flexibility provided by our balance sheet, and the depth and experience of our corporate team, we are exceptionally well positioned for the future. Current fundamentals for our business are strong. Barring unanticipated macro events, we believe that operating performance should continue to improve. with the greatest opportunity coming through steady growth in midweek occupancy and rate. Leisure travel has proven resilient, supporting the observed consumer shift towards experiences. The past several years have provided opportunities for us to demonstrate both the strength and stability of our business and the capabilities of our team. I am confident in our ability to produce strong returns for investors over the coming years. It is now my pleasure to turn the call over to Liz for additional details on our balance sheet, financial performance during the quarter, and annual guidance.

Thank you, Justin, and good morning. Before I begin, I would like to echo Justin's comments, acknowledging the teams at our hotels in Southern California for their acts of service and unwavering hospitality during and following the recent wildfires. They have gone above and beyond to care for our guests, their fellow team members, and their surrounding communities. our hearts go out to everyone impacted. We are pleased to report another strong quarter and year for our portfolio of hotels. Comparable hotels total revenue was $329 million for the fourth quarter and $1.4 billion for the full year, up approximately 4% and 2.5% as compared to the same periods of 2023 respectively. With continued strength and leisure demand and additional recovery and business demand, Fourth quarter comparable hotels rev par was $109, up approximately 3%. ADR was $153, up approximately 1%. And occupancy was 71%, up 2% as compared to the fourth quarter, 2023. For the full year, 2024, comparable hotels rev par was $119, up more than 1%. Comparable hotels occupancy was 75%. approximately 1%, and Comparable Hotels ADR was $159, up approximately 1% as compared to 2023. As anticipated, October was our strongest month during the quarter, with year-over-year Comparable Hotels REVPAR growth of 4%. During the quarter, our Seattle properties in Renton and Tukwila were negatively impacted by temporarily reduced inbound training and consulting business associated with Boeing disruption. Our Nashville, Atlanta, and Denver assets also experienced weaker year-over-year performance during the quarter, due in large part to recent supply growth and less robust group and event calendars. During the quarter, we saw meaningful year-over-year growth at our recently acquired downtown Salt Lake City hotels, which benefited from strong event and convention calendars. Our Embassy Suites in the South Jordan Submarket of Salt Lake City also saw significant year-over-year growth due to strengthening group and business demand in market. Other top performing hotels included our two South Bend hotels, which benefited from Notre Dame football games, our hotels in Tampa and Orlando, which saw increased demand from Hurricane Milton and Helene-related business, and our Houston West Energy Corridor hotels, which saw a meaningful increase in corporate negotiated business. Preliminary results for the month of January 2025 show a slight improvement in comparable hotels RevPar as compared to January 2024, driven by growth in ADR. During the month, strong performance from our LA and DC hotels offset travel disruptions elsewhere in our portfolio, largely related to uncharacteristic extreme winter weather in many of our Sunbelt markets. And portfolio ADR growth offset modest declines in occupancy. Many of our LA hotels have continued to see fire-related recovery business in February, and as Justin mentioned, we believe we will continue to have some related business through at least the first quarter. Looking at the remainder of the quarter, day of week shifts should help compensate for one fewer day in February, and March will benefit from the Easter holiday shift into April. New Orleans, which benefited from the Super Bowl in February, is anticipated to benefit from Mardi Gras in March of this year. Looking at day over day trends, improvements in leisure and business travel contributed roughly equally to fourth quarter improvements in occupancy year over year. Weekday occupancy was up every month during the quarter, with October up 1.6% and November and December up 4.2% and 3.6% respectively. Weekend occupancy varied, with October up just over 1%, November essentially flat, and December up almost 10% as compared to the same periods in 2023. Weekday rate growth for the quarter was fairly consistent with October and December approximately 2% and November up just over 1%. Weekend ADR was down 1% in October and almost 2% in November, but up almost 4% in December. Weekday ADR continues to lag weekends representing meaningful upsides as midweek demand continues to strengthen, positioning us to move rates higher. Same store room-night channel mix quarter over quarter remained relatively stable, with brand.com bookings at 41%, OTA bookings and property direct at 13% and 23% respectively, and GDS bookings representing 17% of our mix. Fourth quarter same-store segmentation was largely consistent with the fourth quarter of 2023. BAR remained strong at 33%. Other discounts represented 31% of our occupancy mix. Group was 14%, government was 5%, and the negotiated segment represented 17% of our mix. On a comparable basis, we continued to see growth in other revenue, which were up 16% during the quarter Food and beverage revenues also improved 5%. Turning to expenses, comparable hotels' total hotel expenses increased by approximately 5% for the fourth quarter and approximately 4% for the year, as compared to the same periods of last year, or 2% on a CPOR basis for both the quarter and the full year. Total payroll per occupied room for our same-store hotels was $41 for the quarter, up only 1% to the fourth quarter 2023. Contract labor decreased during the quarter to 7.3% of total wages and was down 250 basis points or 23% versus the same period in 2023. Comparable hotels utilities were up 6% as were hotel administrative expenses and sales and marketing expenses. While more variable expenses were well controlled, fixed expenses were particularly challenging with real estate taxes up 11% during the quarter and property insurance costs up largely due to a challenging year-over-year comparison with losses under our deductible at several properties in the fourth quarter of this year. For the year, comparable hotels variable expenses increased 4% or just over 2% on a CPOR basis. Property taxes, insurance, and other, which was up only 1.2% for the year, benefited from decreases in property insurance premiums year-over-year and several one-time real estate tax benefits, creating a challenging comparison as we look forward to 2025. We achieved comparable hotels adjusted hotel EBITDA of approximately $108 million for the fourth quarter and $509 million for the full year, up approximately 3% to the fourth quarter 2023 and up slightly as compared to the full year 2023. We are especially pleased with our comparable hotels adjusted hotel EBITDA margin of 32.9% for the fourth quarter and 36% for the full year, down only 40 basis points and 70 basis points, respectively, as compared to the same periods of 2023, which has consistently exceeded our expectations. Adjusted EBITDA RE was approximately $97 million for the quarter and $467 million for the full year. both up approximately 7% as compared to the same periods of 2023, respectively. MSFO for the quarter was approximately $77 million, and for the full year was $389 million, both up approximately 6% as compared to the same periods of 2023. During the quarter, we paid distributions totaling $58 million, or $0.24 per common share, bringing our annual payout, including the special dividend paid in January of 2024, to approximately $244 million, or $1.01 per common share. Looking at our balance sheet, as of December 31, 2024, we had approximately $1.5 billion of total debt outstanding net of cash. approximately 3.1 times our trailing 12-month EBITDA, with a weighted average interest rate of 4.7%. At quarter end, our weighted average debt maturities were approximately three years. We had cash on hand of approximately $10 million, availability under a revolving credit facility of approximately $568 million, approximately 75% of our total debt outstanding was fixed or hedged, and the number of unencumbered totals in our portfolio was 207. We have four mortgage loans totaling approximately $64 million that will mature this year and term loans totaling $225 million that will mature in the third quarter. We have begun conversations with our lenders and believe we are well positioned to address these maturities. Turning to our outlook for 2025 provided in yesterday's press release, For the full year, we expect net income to be between $173 billion and $202 million, comparable hotels rep part change to be between 1% and 3%, comparable hotel adjusted hotel EBITDA margin to be between 34.2% and 35.2%, and adjusted EBITDA RE to be between $447 million and $471 million. While our asset management and hotel teams are working diligently to mitigate cost pressures, we have assumed for purposes of guidance that total hotel expenses will increase by approximately 4.2% at the midpoint. These increases are driven by higher growth rates for certain fixed expenses, including real estate taxes and general liability insurance, than those experienced last year and have included approximately $2 million of incremental expenses related to brand conferences, which occur every 18 to 24 months. In addition, the low end of our adjusted EBITDA RE guidance assumes a $2 million loss related to Hotel 57. This outlook is based on our current view and does not take into account any unanticipated developments in our business or changes in the operating environment, nor does it take into account any unannounced hotel acquisitions or dispositions. The low end of our range reflects more modest lodging demand growth and a slight pullback in leisure demand offset by continued improvement in business transient. The high end of the full year range reflects relatively steady macroeconomic conditions throughout 2025 with continued strength in leisure demand and improvement in business transient, a portion being driven by extended fire-related business in our L.A. market hotels. As we begin 2025, we are confident we are well positioned for continued strong operating fundamentals and bottom line performance. The operating environment is relatively stable with favorable supply-demand dynamics. Our recent capital allocation activity has enabled us to drive incremental value for shareholders, and our balance sheet continues to provide us with meaningful optionality. Our differentiated strategy has proven resilient through economic cycles, enabling us to preserve equity value in challenging environments and to be uniquely positioned to enhance value through opportunistic transactions when market conditions are more conducive. Our team works diligently to maximize the performance of our existing portfolio while staying ready to take advantage of market shifts and opportunities to further strengthen returns for our shareholders. That concludes our prepared remarks. We would now be happy to answer any questions you have for us this morning.

Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, It may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. My first question comes from Dory Keeston with Wells Fargo. Please proceed with your question.

Thanks. Good morning. You mentioned a challenging comparison for 2025 fixed costs versus 24. If you were to normalize for that, what operating expense growth have you assumed in your 25 guidance?

um good morning dory yes so for guidance for 2025 we do have a challenging fixed cost expense comparison we had several one-time tax benefits as well as decreased property insurance premiums throughout 2024. if you take the one-time benefits of around um you know $2.7 million in 2024, and you assume some benefits, but not as much in 2025, plus you have an incremental addition with Madison, you're around a $3.2 million hurdle year over year. Normalizing for that, it's about a 5% assumed increase to property taxes. And so, you know, I think as you think about where that would put us overall. It would be certainly less than what we have in the full guide for this year. I mentioned in my prepared remarks with the increase baked in for fixed expenses at the midpoint, you're at 4.2% for total hotel expenses. That has variable expenses outside of fixed cost around 3.5%. So certainly you'd be less than 4% without those fixed cost hurdles.

Okay. Thanks, Liz. And then you've been selling relatively small hotels in tertiary markets with probably outsized CapEx needs versus their upside. What percentage of your portfolio would you describe in that similar way today? And then just who is the natural buyer for these assets that you found?

So to answer the first part of the question, you know, between seven and 10% likely of our portfolio would fit in a similar category. Certainly, we have prioritized assets for both strategic and tactical reasons. Strategic, I think you highlighted in markets where we see limited upside and we have near-term CapEx needs. And then tactically, we have found that we're able to create a more competitive bidding process around smaller assets within our portfolio. where the total deal size is reasonable and approachable for local owner-operators who have been the primary bidders on those. As a result, we're able to create a competitive bidding process. And as I highlighted in my prepared remarks, we're able to achieve strong sales price and dispose of assets at low cap rates. which positions us to redeploy proceeds in a creative fashion and grow overall value for our shareholders. I think we've shown over the past several years a willingness and an ability to pivot and to adjust our acquisitions and dispositions strategy according to changes in the market or to take into consideration changes in market conditions That is the portion of the market that's the most active today. But as we move through the year, that could change, and we'll adjust from a strategic standpoint accordingly.

Okay. Thanks so much.

Thank you. Our next question comes from Austin Worshmut with KeyBank Capital Markets. Please proceed with your question.

Great. Thanks, and good morning, everybody. Liz, I think I've asked you this in the past, but going to ask you again, you'd referenced that midweek ADR continues to be meaningfully below weekend ADR. How close are you to reaching an occupancy level midweek where you kind of cross that threshold that gives you the ability to push on rate more meaningfully?

We're certainly getting closer and we've seen some of it. I think the more we are able to drive that compression midweek, we're able to mix manage and that's preferencing higher rated negotiated business and certainly preferencing bar rates that can be pushed higher by that additional compression. This time of year is not our strongest from an occupancy perspective, but as we were rounding out last year, we were still looking back over a more extended period of time. We probably still had 5% to go overall relative to pre-pandemic levels where we really got that compression and ability to grow rate. So it's still opportunity, but have continued to shrink the gap as we move through last year and certainly believe as we continue to our higher occupancy months, we'll continue to see that opportunity.

That's helpful. And then switching gears, Justin, you know, you referenced the transaction market remains challenging, but, you know, somewhat of a bid-ask spread. Curious what you think narrows it and to the extent that it remains wide. I mean, how aggressive are you willing to get, you know, cobbling together some of the smaller portfolios and redeploying those proceeds into buying back shares of your stock. Thanks.

An interesting question, certainly. Our preference with the types of assets we've been selling recently would be to put them together in a portfolio and to sell them as a group. Certainly a much more efficient way to transact with some of the smaller assets. The reality is today, you know, we would not be able to maximize value in a transaction, a scale transaction of that kind, meaning that there are fewer bidders interested in portfolios, and those who are, are less aggressive and bidding for those portfolios than there are, you know, for individual assets. And as a result, You know, we've customized our strategy, our tactical strategy, based on the environment as it exists. And as you've been able to see, we've executed very successfully on a portfolio of assets through individual transactions. I think as we move through the year, our expectations are that things could change. I know a number of our peers have highlighted on their calls, and we also believe that the debt markets are relatively open, meaning that debt financing is fairly readily available, albeit more expensive than it has been historically. And importantly, loan-to-value is meaningfully lower than it was when we saw the last peak from a transaction volume standpoint. And so when we look at cost of capital for various buyers, and specifically the private equity buyers who tend to pursue portfolios, you know, combined with some general uncertainty about the long-term direction of the space, it's been harder to achieve premium valuations either on larger assets or on portfolios. You know, I think you asked what might change that. I think continued reductions in overall interest rates would certainly be helpful and or a more meaningful reacceleration in terms of fundamental performance for the industry as a whole. And, you know, I think the opportunity exists for either or both of those to happen as we move through the year. And certainly we're, you know, we would position ourselves accordingly in that environment.

Appreciate the thoughts. Thank you.

Thank you. Our next question is from Jay Kornreich with Wedbush Securities. Please proceed with your question.

Hi, thanks. Good morning. Just curious of your thoughts for the guidance for our growth of 2% in 2025. If there was any opportunity to outperform that, do you see that coming more from the midweek business transit demand picking up or the weekend demand continuing to stay elevated? And are you able to provide any kind of cadence as to how you see quarterly red par shaping up throughout the year?

Good morning, Jay. It's a good question. I think we have continued to articulate our belief that we have opportunity midweek from an occupancy perspective. And again, as Austin asked, with that occupancy, we believe there's ADR opportunity. That's where we have the gap to pre-pandemic levels. And from a leisure perspective, we're continuing to outperform generally. And I think while there was some normalization, as the industry liked to refer it to with leisure last year, there's still an opportunity that that could outperform this year, given that normalization last year and the fact that it's remained strong overall. So I think The opportunity to outperform comes from both business and leisure, though as we look at tactically what we're seeing and what we're anticipating, it's more of the midweek growth at the midpoint of our guidance range. And then as we think about cadence, it's a slow start to the year. While we do have benefit from the LA properties, we've been impacted in January in particular by weather. related events. Some of that has spilled over into February as well, but really January was a tough start for the portfolio outside of LA. Thankfully, we have LA to help compensate for that sum, but we believe we'll continue to benefit as we move throughout the year from a Rev Park growth perspective. Also, as we progress, our Madison Embassy, which we acquired and which opened in June of last year, will have more time to ramp as we progress through the year.

Great, thank you. I'll hold it there.

Our next question comes from Flores Van Dygum with Compass Point. Please proceed with your question.

Hey, good morning, Justin. I'd love to. I mean, I sometimes think that you don't get the credits in terms of capital allocation that you perhaps deserve. You've clearly been leading more into the some of the your urban markets uh you've got another call is it seven percent to ten percent of your hotels that you could look to to sell um creatively redeploy those where do you think you're going to be redeploying them uh you know capital is it more urban is it more suburban how and how is that mix shifted maybe if you can talk how the portfolio looked in 2020 between urban and suburban, and how do you see that trending over the next three to four years?

Absolutely. So in terms of immediate opportunity for redeployment, I think we've demonstrated that the most attractive opportunity for us recently has been share repurchases. Certainly, we monitor that. And as we underwrite any type of acquisition, whether it's existing or new development, we consider that opportunity relative to an opportunity to redeploy into our own shares, which we see as being tremendously valuable. I think when you think about the overall makeup of our portfolio, from an EBITDA contribution, and some of this has shifted as we've seen continued improvement in the performance of urban markets. We're roughly 40%, just under 40% urban today. And when you look at number of hotels, roughly 30%, remembering that a number of our urban hotels are larger, so have more keys. And certainly when we think about overall EBITDA contribution per hotel, their larger individual contributors. That is a mix that continues to feel comfortable for us. And while we have recently seen in some of our urban markets strong relative performance, we continue to see strong performance in a number of our suburban markets as well. And, you know, I think it has been our long-term strategy to be broadly diversified with exposure to markets where we see the potential for outsized growth, the reality is that over an extended cycle, you know, that requires us to be present in a mix of markets. And we have found, you know, that over several decades in the industry, having a healthy mix of strong suburban markets combined with urban markets has created both the best opportunity for stability in our portfolio and the best potential for long-term growth.

Thanks. Maybe if I have a follow-up for Liz. Liz, the $295 million of debt that matures this year, I think the 10 years dropped almost 50 basis points over the last month. Where would you borrow at today for a for five or 10-year money? And would you consider pre-funding some of those maturing loans today and use the cash to get some nice interest?

You know, the term loans in particular that come due are at favorable pricing. I do think there could be an opportunity as we you know, recast that. That's a majority of what you mentioned. It's 225, the total that you mentioned. You know, we're beginning those conversations now, so I think your question is reasonable. You know, we'll look at, you know, timing and, you know, interest savings as we move forward towards that maturity. The secured debt is a little trickier. Those certainly, you know, were longer-term, you know, you know, debt placements and they had very attractive interest rates, those will be trickier to replace, you know, at certainly a lower interest rate than where they were. We also have a few swaps maturing that we'll manage as well. And, you know, some of that interest savings is not currently baked into what is provided in the implied guidance. There could be some upside there.

And in terms of the term of debt that you would look to put on, is it five or is it extend the maturities or, you know, five years or something like that? Is that the right way to think about it?

Certainly, I would love five years. I think, you know, the market, the terminal market in particular that will explore all options, the terminal market in particular has been a little bit tighter than five years as of late. I think things are starting to improve. And so, again, you know, in conversations there, but certainly would love to approach five years. But, you know, we'll see as we continue to progress in our conversations with the lenders.

Thanks, Liz.

Our next question comes from Michael Bellisaro with Baird. Please proceed with your question.

Good morning, everyone.

Good morning. Good morning, Mike.

I got a few questions for you. Just first on operating expenses and sort of looking ahead. And just help us understand, like, what are you, what are your operators doing differently or maybe better in 2025 to offset some of the above inflationary growth that you referenced? And then sort of when you step back, how much of the P&L is actually kind of, quote, controllable versus non-controllable?

When I'm giving broad ranges, you know, when I say variable, I'm really speaking about everything outside of property taxes, insurance, and other. And as you're alluding to, not all of that is perfectly variable because we certainly have, you know, salaries and overheads and things like that that are included. So it's not perfectly variable. What I will say with that is that as we improve occupancy, our cost on property per occupied basis improves. And so that's really how we're looking at our guide for 2025. If you look at where we finished the year on a cost per occupied room basis for variable expenses, we were at 2.3% growth from a comparable standpoint. And at the midpoint, we're slightly higher than that. So that would account for some general inflationary pressures, but, you know, reasonable as we think about what we're guiding, you know, relative to the top line. But where we're seeing the big meaningful increase on a preoccupied room basis is really those fixed expenses.

Anything different that your operators are doing or targeting for 2025?

You know, I think we continue to leverage our extensive benchmarking that we have and are constantly looking for opportunities. I think, you know, we have seen decelerating you know, wage pressure as we move throughout last year. I think that that has stabilized, but I think productivity as we're reducing contract labor is something our managers continue to focus on. And then beyond that, you know, all controllable expenses, you know, I think the team has done a really good job there, so it's always hard to anticipate more. You know, that's really where I think some of our, while we did outperform last year from a fixed expense perspective, the variable expense management was very strong as well. And I think, you know, we continue to look for outliers from a performance standpoint in our portfolio and learn best practices.

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