RLJ Lodging Trust

there will be an opportunity to ask questions. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. I would now like to turn the call over to Nikhil Bala, RLJ's Vice President and Treasurer of Corporate Strategy and Investor Relations. Please go ahead.

Thank you, Operator. Good morning and welcome to RLJ Lodging Trust 2021 Third Quarter Earnings Call. On today's call, Leslie Hale, our President and Chief Executive Officer, will discuss key highlights for the quarter. Sean Mahoney, our Executive Vice President and Chief Financial Officer, will discuss the company's financial results. Tom Bardenette, our Executive Vice President of Asset Management, will be available for Q&A. Forward-looking statements made on this call are subject to numerous risks and uncertainties that may lead the company's actual results to differ materially from what had been communicated. Factors that may impact the results of the company can be found in the company's 10Q and other reports filed with the SEC. The company undertakes no obligation to update forward-looking statements. Also, as we discuss certain non-GAAP measures, it may be helpful to review the reconciliations to GAAP located in our press release from last night. I will now turn the call over to Leslie.

Thanks, Nikhil. Good morning, everyone, and thank you for joining us today. We hope that many of you are back in the office, and for those of you with children, we hope that the transition back to school has been smooth this fall. We were pleased that the recovery of the lodging fundamentals continued during the third quarter, despite some choppiness caused by the Delta variant from mid-August through early September. Although the industry's REFAR growth was primarily driven by leisure demand, The improvement in business travel and group trends also contributed, which was evident in the quarter-over-quarter pace of growth of both the urban and top 25 markets relative to the overall industry. We are encouraged that these positive trends have continued through October. During the quarter, the composition of our portfolio allowed us to capture these improving trends, which drove our strong performance. With a backdrop, of the Lodging Recovery Gaining Momentum we executed on multiple strategic initiatives. Since our last call, we have continued to actively recycle proceeds from non-core dispositions into high-quality acquisitions. We further enhanced our already solid balance sheet by raising an additional $500 million of high-yield bonds and repaid the 6% fell course senior notes, while further laddering our debt maturities and increasing our acquisition capacity under our credit agreements, and we continue to advance on our internal growth catalysts. These efforts have further enhanced our portfolio and created incremental balance sheet flexibility, positioning us to leverage multiple channels of growth to drive outperformance throughout the entire cycle. With respect to our operating performance, our open hotels achieved 63.8% occupancy during the third quarter, which was a 310 basis point increase over the second quarter, achieving 79% of 2019 levels. July recorded the strongest occupancy of the pandemic, while August and September moderated due to a combination of normal seasonality and the impact of the Delta variant. We were encouraged with our ability to maintain rate during the quarter. Our portfolio achieved an ADR of $160, which represented nearly 90% of 2019 levels. We were also able to demonstrate pricing power with over 25% of our portfolio exceeding 2019 ADR, which gives us optimism that consumers can absorb increased pricing when demand normalizes. The continuation of strong leisure demand drove our weekend occupancy to 76.8%, which was a 280 basis point increase over the prior quarter, and our weekend ADR improved by nearly 12%. Given the elevated leisure demand, our resort hotels achieved REVPAR that was 114% of 2019 levels, with ADR exceeding 2019 levels by 20%. Additionally, a number of our drive-to markets exceeded 2019 REVPAR, such as Charleston and South Florida, which achieved 130% and 117% respectively. We were also encouraged by the sequential improvement taking hold in both business transient and group. As an indicator of improving business travel momentum, our weekday occupancy grew to 58.5% during the third quarter, a 320 basis point increase from the prior quarter. Our urban hotels also benefited from this trend, achieving 76% of 2019 occupancy, resulting in a 400 basis point improvement over the second quarter. Overall, we were pleased to see our business transient revenues improve by 44% since the last quarter. led by markets such as Atlanta, LA, and Boston. The growth of our group revenues was the strongest of all of our segments, increasing by 54% since the second quarter, with room nights improving by 34%. We benefited from continuing improvements in small social groups such as weddings and sports teams, which are attracted to our product type. The pace of recovery is another positive sign, given the significant momentum in our business transient and group revenues, which recovered to 43% and 46% of 2019 levels respectively, nearly doubling from the prior quarter. Overall, our portfolio is well positioned, as evidenced by our third quarter market share gain of 340 basis points, which highlights the competitive strength of our high-quality portfolio. Our top line grew by 21%, while our relentless focus on managing costs allowed our hotel EBITDA to grow by 37%, demonstrating the benefits of our lean operating model. Now, relative to capital allocation, we continue to be very active, recycling capital and advancing on our internal growth catalysts. Since late last year, we have sold several non-core assets and are currently under contract to sell the DoubleTree Metropolitan, which is subject to a significant non-refundable buyer deposit. We look forward to providing additional details after this transaction closes. Including this transaction, we will have sold eight non-core assets at a highly accretive multiple of over 22 times 2019 EBITDA. We are on track this year to accretively recycle over $200 million of proceeds generated from non-core asset sales into three high-quality acquisitions, and market's position to outperform throughout this cycle. In August, we acquired the Hampton Inn & Suites Midtown Atlanta, which is already outperforming our underwriting. We recently closed on the AC Hotel by Marriott Boston Downtown. This hotel recently opened in 2018 and is located within the Ink Block development in Boston's highly desirable South End neighborhood. Boston is a growing hub of the life sciences industry and the AC sits in an A-plus location that is central to the surrounding office and laboratory development. This was an off-market transaction and was acquired at a discount to pre-COVID values and replacement costs. We are also under contract to acquire a recently constructed hotel located within the heart of the upscale Cherry Creek sub-market of Denver. We are excited to enter into this highly sought after and difficult to enter sub-market of Denver and look forward to providing additional details after this acquisition closes. Each of these acquisitions are consistent with our strategy of acquiring premium-branded, rooms-oriented hotels located within the heart of demand in high-growth markets. Each of these hotels will also generate REVPAR and margins which are accretive to our current portfolio and are expected to enhance our growth profile. By match-funding these acquisitions with proceeds from non-core assets sold At a substantially higher multiple, we have locked in significant value. In addition to driving our external growth, we are continuing to make meaningful progress towards unlocking our unique and compelling internal growth catalyst, which we continue to expect to generate $23 to $28 million in incremental EBITDA. We remain on track to relaunch our three conversions in Santa Monica, Mandalay Beach, and Charleston in 2022. The Mandalay Beach renovation is in full swing. For Santa Monica and Charleston, we have completed the model room design and will be starting these renovations shortly. We have made significant strides towards driving multiple channels of growth with our capital recycling and internal growth initiatives, further strengthening our ability to drive EBITDA growth that is above and beyond the cycle recovery. Our balance sheet continues to be a competitive advantage and allows us to execute on our internal growth catalysts and acquisition pipeline while remaining disciplined. Looking ahead, we are encouraged by the moderating COVID cases and the generally positive economic backdrop supported by a strong consumer and rising corporate profits, but also acknowledge concerns around inflation. That said, for the fourth quarter, we expect leisure to follow normal seasonality patterns but remain healthy given the continuing flexibility in hybrid work environment. We also believe that the reopening of our borders to international travel will provide incremental tailwinds for urban markets. We expect business transients to continue to gradually improve through the remainder of the year as offices reopen. We also anticipate continued improvement in small social group bookings, which is supported by the fact that our group pace for the fourth quarter improved by 28% since our last call, And we booked close to 25% of our forecasted fourth quarter group revenues during the third quarter. We are already seeing these positive trends in October's strong performance. As we look out to 2022, we expect a meaningful step forward for the industry with leisure continuing to be strong while group and business transient accelerate as office reopenings gain traction. These positive trends should especially benefit urban markets which should also see tailwinds from increased international travel. These trends, combined with the rate discipline our industry has maintained and the operational efficiencies achieved during the pandemic, give us cause to be optimistic about the potential margin improvement that our industry can achieve as the recovery advances. With respect to the improving backdrop and the broadening of the recovery to urban and key gateway markets, we remain well-positioned, given our favorable portfolio composition the ramp-up of our recent acquisitions, and the unlocking of $23 to $28 million of incremental EBITDA from our embedded catalyst. We believe that all of these factors have positioned us to outperform throughout the entirety of this cycle and will drive significant long-term shareholder value. I will now turn the call over to Sean. Sean?