RLJ Lodging Trust

Welcome to the RLJ Lodging Trust third quarter 2025 earnings call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. 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 John Paul Austin, Director of Investor Relations. Please go ahead.

Thank you, Operator. Good morning and welcome to RLJ Lodging Trust's 2025 Third Quarter Earnings Call. On today's call, Leslie Hale, our President and Chief Executive Officer, will discuss key highlights for the quarter. Nikhil Bala, our Chief Financial Officer, will discuss the company's financial results. Tom Bardinet, our Chief Operating Officer, will also 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 10-Q 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. Finally, please refer to the schedule of supplemental information, which includes pro forma operating results for our current hotel portfolio. I will now turn the call over to Leslie.

Good afternoon, everyone, and thank you for joining us today. Overall, our third-quarter REVPAR results were in line with our expectations, with trends improving sequentially month over month during the quarter. We were pleased to see our urban markets continue their stronger relative performance, and we are particularly encouraged by the momentum building in Northern California, which should continue to benefit our portfolio. Our solid growth in out-of-room spend, combined with our focus on cost containment, allowed us to achieve solid bottom-line results, despite the REVPAR headwinds. demonstrating the strong contributions from our ROI initiatives and the resiliency of our lean operating model. Drilling into our third quarter operating results, our REF part decline of 5.1% was balanced between occupancy and ADR. As we had expected, our performance reflected the broader lodging environment, which faced a layered effect of difficult holiday comps. non-repeat hurricane-related business in Houston and Tampa last year, and softer citywide calendars in many markets such as Chicago, which benefited from the DNC last year, and San Francisco that saw Dreamforce shift from September to October. These factors were compounded by the impact from our three transformative renovations in Waikiki and South Florida, as well as headwinds in Austin, which collectively had a 200 basis point impact on our third quarter rep part. Notably, however, against this backdrop, we gain REF PAR index highlighting the quality of our assets, which is allowing us to take market share. REF PAR at our urban hotels once again outpaced our broader portfolio this quarter by 50 basis points. We believe that urban markets, which benefit from a broad range of demand drivers, should continue to outperform the industry. We were especially encouraged by the performance of our San Francisco CBD hotels, which achieved 19.4% repart growth during the quarter, driven by a strong lineup of smaller conferences, concerts, and special events, which more than offset the calendar shift of the Dreamforce Conference. Regarding segmentation, healthy travel patterns across key sectors such as tech, finance, and consulting along with the sustained momentum and return to office trends, led our non-government-related business travel to achieve 2.4% revenue growth. With our highest-rated customer coming back, corporate rates were up a healthy 3%. However, government-related transient demand remained meaningfully below last year. Our group revenues in the third quarter were impacted by the shift of the Jewish holidays into September, leading to a softer citywide calendar across many markets. Our group demand was further impacted by the ongoing transformation of the Austin Convention Center, which will significantly expand the center and further strengthen the Austin market in the coming years. While the demand environment was soft and the booking window remained short, we were encouraged to see pricing strength as demonstrated by the 2% growth in group ADR for the quarter. With respect to leisure, Trends remain stable, and although we continue to observe some pricing sensitivity among consumers, we were encouraged to see demand up 1% during the quarter. Our urban leisure once again saw stronger relative performance, achieving flat revenue growth, led by a 3.2% increase in demand. Our urban markets are continuing to benefit from strong demand for concerts, sports, and special events. Notably, we were pleased to see positive results from our ongoing strategy to drive out-of-room spend, which grew by 1.3% in the quarter despite lower occupancy. Our non-room revenues generated strong margins and underscores the success of our ROI initiatives aimed at growing food and beverage revenues, reconcepting underutilized space, and growing other ancillary revenues. Growth in our non-room revenues came in over 600 basis points ahead of our REVPAR performance. This growth, paired with our tight cost containment initiatives, allowed our portfolio to deliver bottom-line results ahead of our expectations. Turning to capital allocation, we continued to make progress on several fronts during the quarter. We advanced our three transformative renovations in Waikiki, Key West, and Fort Lauderdale, which are now substantially complete. We continue to ramp our conversions and see significant success, with our four most recently completed conversions achieving 6% growth during the third quarter, including our newest conversion in Nashville, which achieved high single-digit REFAR growth. The solid performance of these assets is testament to the success of our conversion strategy. Consistent with this strategy, during the quarter, we began the physical renovations at the Renaissance Pittsburgh, which would become part of Marriott's autograph collection. The timing of this conversion ideally positions the hotel to benefit from the momentum in the Pittsburgh market, including the NFL Draft, which will be hosted in the city next year. Additionally, we are pleased to announce that our Wyndham-Boston Beacon Hill Hotel will join Hilton's Tapestry Collection, with renovations to commence late next year. This hotel sits in an irreplaceable A-plus location adjacent to Mass General's main campus, which is currently undergoing a $2 billion expansion. Our asset is positioned to benefit from the strong growth trends in all segments of demand, supported by a diverse base of demand drivers, including a strong corporate base, a robust life science and biotech ecosystem, a concentration of leading higher education institutions, and a compelling set of leisure attractions. We believe the selection of Hilton's tapestry collection will allow us to attract robust incremental demand given the limited Hilton flags in the market. And we remain confident that we can unlock significant EBITDA upside of over 40% on a stabilized basis. Our ability to unlock meaningful value within our portfolio is made possible by our lean operating model that allows our portfolio to drive strong free cash flow and maintain a healthy balance sheet that enables us to return significant capital on a sustained basis to our shareholders. Now looking ahead to the remainder of the year, The broader uncertainty and lack of visibility that has persisted since the end of the first quarter has been recently compounded by the government shutdown, which began in October. October is the most important month of the fourth quarter, and despite having had an otherwise strong setup given the holiday shifts and an improved citywide calendar, October saw a red-part decline year over year given the lack of compression created by the shutdown. Additionally, we anticipate that current travel-related headwinds created by the shutdown, including the effect it is having on the air traffic control system, will have an impact on consumers' propensity to travel. Current trends are also impacting the timing of the anticipated contribution from our major renovations in Key West and Waikiki, which were previously expected to begin ramping during the fourth quarter. These factors, combined with the lingering macro uncertainty that is affecting consumer and corporate confidence, has moderated our view of the fourth quarter. We are therefore adjusting our full-year outlook to reflect the impact of these trends with the new range assuming current trends continue. As we look ahead to 2026, We are encouraged by a number of building blocks that, when taken in aggregate, should drive a more positive backdrop for the industry, including a more constructive economic environment with lower borrowing costs, clarity around taxes, and increased investment spending in the U.S., the lapping of difficult comparisons from 2025, including Liberation Day, and the continuation of historically low levels of new supply. Relative to this backdrop, our portfolio is well positioned for 2026, given our favorable geographic exposure and urban footprint, which should allow us to see outsized benefit in an improved demand environment. We are particularly excited about the World Cup in the U.S., and with 72 matches scheduled to take place in many of our markets, we are well positioned to capture this demand. Additionally, Our portfolio will benefit from the 250th anniversary of the US in markets such as DC, Boston, and Philadelphia, as well as the rotation of major sporting events in many of our key markets, including the Super Bowl in Northern California. And we are also poised to capture the ongoing recovery in Northern California. which continues to gain momentum supported by the rapid growth of the AI industry that is stimulating business travel, events and corporate investments against the backdrop of improving safety conditions and increasingly stringent return to office policies. All of these tailwinds for our portfolio will be further bolstered by the ramp of our conversions and the major renovations we completed this year. As we look ahead, we are well positioned to capitalize on what we believe will be an overall improved setup for the industry next year. With that, I will turn the call over to Nikhil.