RLJ Lodging Trust

Welcome to the RLJ Lodging Trust fourth 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 Fourth Quarter and Full Year 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-K 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 for 2025. I will now turn the call over to Leslie.

Thanks, John-Paul. Good morning, everyone, and thank you for joining us today. We were pleased with our solid fourth quarter results, which came in ahead of our expectations, despite a choppy operating environment that was further constrained by the protracted government shutdown. Our operating results benefited from the continued outperformance of our urban markets, the ramp of our completed high-occupancy renovations, as well as our robust growth and non-rooms revenue. These factors, combined with disciplined cost management, contributed to our better-than-expected bottom-line results. The fourth quarter capped a highly productive year for us, during which we delivered our Nashville conversion and continued ramping our completed conversions which on average achieved REVPAR growth that was nearly 700 basis points ahead of our broader portfolio. We advanced the next phase of our pipeline, including the selection of the brand for our Boston conversion. We completed transformative renovations of several hotels and high-demand markets. We achieved robust non-room revenues well in excess of our REVPAR performance, validating investments in our ROI initiatives. We strengthened our balance sheet by addressing all of our near-term debt maturities. We executed on opportunistic asset sales at accretive multiples, and we returned significant capital to shareholders in the form of dividends and share repurchases. The execution of these initiatives has strengthened our long-term growth profile and further bolstered confidence in our ability to deliver on our value creation initiatives, even in an uncertain environment. With respect to our operating performance, our fourth quarter REVPAR decline of 1.5% came in better than what we had anticipated in the midst of the government shutdown. These improved top line results were driven by the relative outperformance of our urban markets, a stronger than expected acceleration of the ramp at our major renovations as the shutdown ended, as well as an overall stronger December, which benefited from positive leisure demand despite a difficult year-over-year comparison for the month. Our urban hotels continue to be a key driver of our performance, as they captured positive trends across a broad range of demand sources this quarter. Among our urban markets, San Francisco CBD was once again the top performer, achieving 52% Red Park growth in the quarter, supported by growth from all demand segments, as well as the calendar shift for the Dreamforce Conference into the fourth quarter. We are encouraged by the ongoing momentum in San Francisco's recovery, supported by a thriving tech economy, improving perception of the overall local environment, and a strong lineup of events this year, including the recent Super Bowl, which was wildly successful, as well as the upcoming World Cup games. From a segmentation standpoint, our non-government-related business transient revenues grew by 5% during the quarter. and with our highest rated customer demand segment continuing to grow, corporate rates were up a solid 2%. Overall, non-government business travel demand continues to benefit from the resiliency of the economy and healthy corporate profits, especially in sectors such as tech, finance, and consulting, which continue to see positive momentum in return-to-office trends. However, government business demand was further impacted during the quarter by the shutdown, primarily affecting our D.C. and Southern California markets. Relative to group, our revenues were down 3%, as in-the-quarter, for-the-quarter demand was artificially impacted by the shutdown in October and November. However, group dynamics remained strong, as evidenced by the growth in our group ADR of 4%, despite the soft demand. Regarding leisure, Trends remain stable, and we were encouraged to see demand increase a healthy 1% during the quarter, although we continue to observe some price sensitivity among consumers. Our urban leisure once again saw stronger relative performance, achieving revenue growth ahead of our portfolio, driven by strong demand around the holidays. Our leisure segment also benefited from our recently renovated hotels in Waikiki and Deerville Beach, which achieved REVPAR growth of 12% and 10% respectively in December, as they resumed their ramp following the end of the government shutdown. Despite softer occupancy in the quarter, we achieved strong non-room revenue growth of 7.2%, exceeding our REVPAR performance by nearly 900 basis points, allowing us to generate positive total revenue growth. These results validate our strategy to drive high-margin out-of-room spend and underscore the success of our ROI initiatives aimed at growing profitable food and beverage, reconcepting underutilized space, and growing other ancillary revenues. Overall, better-than-expected REVPAR performance, aided by contributions from the ramp of our completed conversions and renovations, robust non-room revenue growth, and continued disciplined cost containment drove much of the EBITDA upside relative to our expectations. Turning to capital allocation, we made significant progress on a number of fronts during the fourth quarter. We continue to ramp our completed conversions, with our four most recently completed conversions achieving 15% REVPAR growth for the full year. We completed transformative renovations at our high-occupancy hotels in Waikiki and Deerfield Beach and are already seeing positive trends, with both assets generating REVPAR growth of more than 10% in December. We made further progress towards our conversion of the Renaissance Pittsburgh and expect to relaunch this asset as part of Merritt's autograph collection this year. And we advanced the programming of our Wyndham-Boston Beacon Hill conversion to Hilton's Tapestry collection, with construction slated to commence later this year. We remain on pace to deliver an average of two conversions per year and look forward to announcing our next conversion later this year. Additionally, during the quarter, we executed on the opportunistic sale of two hotels at accretive multiples and used the proceeds to pay down debt. Subsequent to the quarter, we completed a series of refinancing transactions, which addressed all of our debt maturities through 2028. Our strong balance sheet and liquidity continue to support the optionality that we have with respect to capital allocation. This year, we returned $120 million to our shareholders. through shared repurchases and a well-covered dividend. Now, looking ahead, we are cautiously optimistic overall. While we acknowledge the lingering geopolitical uncertainty, we remain constructive on the setup of the broader economy, given the tailwinds expected from moderating interest rates and tax cuts, which have positive implications for travel demand. Relative to this setup, the lodging industry is expected to achieve slightly positive rep part growth this year, driven by the ongoing positive momentum in non-government-related business travel, increased leisure demand, especially urban leisure demand, from several unique events, particularly the World Cup Games plus the 250th anniversary of America, in addition to healthy group dynamics. We believe that these trends will disproportionately favor urban markets. allowing them to continue to outperform the broader industry. Against this backdrop, we believe we are well positioned given our favorable geographic exposure, urban footprint, and high-impact capital investments, which should allow us to benefit from the broad-based growth across all the segments that urban markets are capturing, a favorable footprint with a number of World Cup games across nine of our markets, including prominent games in New York, Los Angeles, and Miami, the 250th anniversary of America with large-scale related events in the Boston, New York, D.C., and Philadelphia markets. The favorable rotation of more major sporting events, including the NFL Draft, the Major League Baseball All-Star Game, and the NCAA March Madness. A healthy group pace and strong group pricing, particularly in the second quarter, supported by these events. continued growth of non-room revenues driven by our successful ROI initiatives, the ongoing momentum in our Northern California market supported by the rapid growth of the AI industry that is stimulating business travel, events, and corporate investment, and the tailwinds from the ramp of our completed conversions and high-occupancy renovations. In aggregate, these tangible catalysts and the resiliency of our urban-centric portfolio underpin our positioning for this year. Our strong relative positioning is further supported by our flexible balance sheet, which will allow us to execute on our key investments. Overall, we remain confident in the long-term outlook for the lodging sector, especially against an elongated period of limited new supply, which will disproportionately benefit urban markets, allowing our urban-centric portfolio combined with our value-creating initiative to drive shareholder returns long-term. With that, I will turn the call over to Nikhil.