Xenia Hotels & Resorts, Inc.

Good day and welcome to the Xenia Hotels and Resorts fourth quarter and full year 2020 results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one, on a touch-tone phone. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Cameron Frosch, Senior Analyst, Finance. Please go ahead.

Thank you, Andrew. Good afternoon, and welcome to Xenia Hotels and Resorts' fourth quarter and four-year 2020 earnings call and webcast. I'm here with Marcel Verbas, our Chairman and Chief Executive Officer, Barry Bloom, our President and Chief Operating Officer, and Atish Shah, our Executive Vice President and Chief Financial Officer. Marcel will begin with a discussion of our operating results and our 2020 achievements. Barry will follow with more details about fourth quarter and four-year 2020 results and details on our capital expenditure projects. And Atish will conclude our remarks with a review of our balance sheet and outlook. We will then open the call for Q&A. Before we get started, let me remind everyone that certain statements made on this call are not historical facts and are considered forward-looking statements. These statements are subject to numerous risks and uncertainties as described in our annual report on Form 10-K and other SEC filings, which could cause our actual results to differ materially from those expressed then or implied by our comments. Forward-looking statements in the earnings release that we issued this morning, along with the comments on this call, are made only as of today, March 1st, 2021, and we undertake no obligation to publicly update any of these form-lifting statements as actual events unfold. You can find the reconciliation of non-GAAP financial measures to net income and definitions of certain items referred to in our remarks on this morning's earnings alerts. An archive of this call will be available on our website for 90 days. I'll now turn it over to Marcel to get started.

Thanks, Cameron, and good afternoon to all of you joining our call today. Clearly, 2020 was an incredibly challenging year, and one that we will not forget anytime soon. As soon as the pandemic began to unfold, lodging demand collapsed. While the lodging industry continues to struggle due to the pandemic, we feel we have weathered the worst of this downturn, and we believe that Xenia is well-positioned for future growth. Similar to the third quarter, we saw encouraging levels of leisure demand during the fourth quarter. October occupancy was a high watermark since the beginning of the pandemic. after which we experienced a slight slowdown in November and December as a result of seasonality in demand and more significant restrictions that were enacted as COVID cases increased in many markets. Corporate transient and group demand continued to be limited, as it was throughout the upper upscale and luxury segments across the U.S. Our results for the quarter were reflective of the week overall industry fundamentals. During the quarter, we had net income attributable to common stockholders of $24.3 million, which was aided by gains on the dispositions we completed during the quarter. Adjusted EBITDA REIT was negative $10.1 million, and adjusted FFO per share was negative 24 cents. Encouragingly, our same property portfolio of 34 hotels achieved hotel EBITDA of only negative $2.9 million, a substantial improvement over the preceding two quarters during which a significant number of our properties were initially closed and then methodically reopened. All of our 34 same-property assets were opened during the quarter. With only Hyatt Regency Portland remaining closed, 94% of our total room count has been and continues to be open for business. Out of these 34 properties, 13 were able to achieve positive hotel EBITDA performance driven by excellent cost controls, thereby reducing our cash burn and limiting our operating losses compared to prior quarters. For the full year 2020, we had a net loss of $153.3 million. Our adjusted EBITRE was negative $51.7 million, and our adjusted FFO per share was negative 82 cents. Despite the difficult operating conditions and most of our properties being closed for some portion of the year, 40% of our properties achieved positive hotel EBITDA for the full year. The pillars of our company strategy were evident in the way we responded to the crisis in 2020. I would like to highlight these pillars again and review how they provided the company utility as we weathered the worst demand shock the logging industry has ever experienced. The first pillar of our strategy is a transaction-oriented mindset with a focus on diversification, quality, and portfolio enhancement. Since well before our public listing in February 2015, and continually so since that time, we have transformed our portfolio through transactions, and we were able to continue doing so in 2020. Early in the year, we had nine properties under contract to be sold, including our Kimpton portfolio, Renaissance Austin Hotel, and Renaissance Atlanta Waverly. While none of these sales close as agreed upon, we successfully retained approximately $29 million of deposits. Though initially disappointed that these transactions did not close, we pivoted quickly to evaluate different avenues to enhance the company's balance sheet and liquidity while keeping a firm gaze on the potential future growth profile for the company. With the experienced team we have in place, we completed four dispositions totaling almost $400 million. The sale of Renaissance Austin to a different buyer at a discount to its pre-pandemic valuation was reflective of its nature as a heavily group-dependent hotel with significant near-term capital needs that we expected to have a difficult road back to prior peak performance. The combined sale price for the three other hotels we sold, Residence Inn Cambridge, Marriott Napa, and Hotel Commonwealth, represented an 11 times multiple on 2019 Hotel EBITDA, an outstanding result considering market conditions. We believe that this pricing represents a minimal discount of pre-COVID valuations, particularly given specific market and property dynamics impacting these assets. Since the approximately six years since our listing, we have transformed our portfolio by selling 26 hotels for approximately $1.5 billion and acquiring 13 hotels for approximately the same amount, representing just over $500 million in average annual transaction volume. As a result of our robust transaction activity over the past several years, our portfolio now consists entirely of luxury and upper upscale hotels and resorts, compared to approximately 75% at listing. We have selectively acquired high-quality assets in primarily top 25 markets and key leader destinations, and decisively sold assets that we believe had limited upside and or significant capital expenditure needs with highly uncertain ROIs. We feel that this has enhanced the company's growth outlook considerably. One of the outcomes of our transaction strategy is that we have significant exposure to Sunbelt locations, where we believe demand growth and a more benign expense environment will aid our recovery. We also own properties in a variety of key leisure and drive-thru destinations, as this has been an important part of our investment strategy throughout our history. We believe that markets such as Orlando, San Diego, Savannah, Key West, Birmingham, Scottsdale, and Napa are set to have a quicker ramp-up to stabilization in the current environments. And we have seen a glimpse of this in the early days of the recovery. Our geographic exposure and diversity, as well as the appeal of our assets to different demand segments, certainly benefited us in 2020. as we were able to reopen our properties in a more expeditious manner than many of our peers during the year. Our initial and sustained occupancy levels have allowed us to reduce our losses significantly from the periods when a substantial portion of our properties were temporarily shuttered. Now turning to the second pillar of our strategy, an emphasis on a strong and flexible balance sheet. Coming into this crisis, we fortunately were well positioned with a strong balance sheet and manageable debt maturities. Faced with the crisis created by the pandemic, our team put significant time and energy into preserving the balance sheet. These actions included amending our debt agreements and raising $500 million through the issuance of senior notes. We addressed our near-term maturities and now have no debt maturities until 2023. Also, at year-end, we had approximately $750 million in total liquidity compared to approximately $450 million in total liquidity at year-end 2019. Our team has always put an emphasis on balance sheet health, and as a result, we've maintained our financial flexibility, allowing for growth in the years ahead. Lastly, the third pillar of our strategy is to have aggressive asset management initiatives and leveraging relationships with both brands and managers. We have some of the strongest relationships in the industry with the best brand and third-party management companies, with a particular emphasis on our relationships with Marriott and Hyatt. As we think about our deep and long-standing relationship with Marriott, I would be remiss to not mention how deeply saddened we are by the loss of Arnie Sorensen. As many in the industry have already said, Arnie was not only an outstanding leader and business partner, he was a remarkable man. who was a friend and mentor to many. While we mourn Arnie's passing, we know that Marriott is in good hands. We congratulate Tony Capuano on his appointment as CEO and Stephanie Lenartz on her promotion to president. We look forward to continuing our strong relationship with Tony, Stephanie, and the Marriott team. We believe that being aligned with best-in-class brands that provide a relevant brand promise to consumers is a significant advantage for a company due to the key attributes they offer, especially when market conditions like today's environment exist. These advantages include superior revenue channels, proven guest loyalty programs, the quick rollout of formal branded cleanliness programs, strength of marketing and advertising platforms, significant technology investments to quickly implement mobile check-in and other initiatives, and innovative changes to operating models and ancillary fee structures. In the early days of the pandemic, we formulated an aggressive action plan to help mitigate its impact on the company. Having strong and experienced asset managers allowed us to make swift, well-informed, and smart decisions. Our asset management initiatives and the expertise of the companies operating our assets allowed us to preserve company value with an emphasis on cost control initiatives. which has been a particular strength of our company throughout the years. Looking back on the decisions we made around closing and reopening our properties, we believe strongly that the right decisions were made, allowing us to minimize losses and prepare for the recovery. In addition to our asset management expertise, we have a highly experienced project management group that has been instrumental in us investing prudently and effectively into our portfolio. Over the past four years, we have invested well over $300 million in capital projects on hotels that we currently own. These projects included 16 full guest room renovations for 48 percent of our rooms. In addition, we added and or renovated large portions of meeting and public space throughout the portfolio. Through a combination of recent transactions and capital expenditures, we have significant revenue growth opportunities. We developed a new 25,000-square-foot ballroom and 32,000 square feet of pre-functional support space at High Regency Grand Cypress in 2019. In addition, last year we renovated the pre-existing ballroom and meeting space. The resort now features 100,000 square feet of brand-new state-of-the-art flexible meeting space, which will serve the property well as group business demand recovers over the next few years. Additionally, and as Barry will discuss, we have now largely completed the exciting transformational renovation at Park High Aviara Golf Club and Spa. We remain very bullish on the long-term growth prospects for many of the other hotels and resorts we acquired in recent years. We certainly expect to build a potential acquisition pipeline and hope to be an active acquirer during the next upcycle if appealing opportunities present themselves. as we have successfully done in prior cycles. However, we are incredibly pleased to have been able to acquire a number of tremendous properties that have attracted valuations over the past few years to help fuel our revenue and earnings growth in the years ahead. In addition to the high-agreedancy Grant Cypress and Clark Hyde Aviara, this includes high-quality assets such as high-agreedancy Scottsdale, Royal Palms Resort, Fairmont Pittsburgh, Ritz-Carlton Denver, Ritz-Carlton Pentagon City, and Waldorf Astoria Buckhead. We believe that our asset management oversight and well-executed renovation projects will allow us to fully capture embedded growth opportunities. The same principle applies to High Regency Portland as well. It is an outstanding property that we acquired at a very attractive basis in late 2019. We look forward to reopening the hotel at demand warrants as we remain strong believers in its long-term potential. Overall, we expect our portfolio to adapt very well during the recovery and as our business evolves. We believe we are poised to outperform relative to others coming out of this downturn. The pandemic has in many ways served as an economic reset for many industries, including the logging industry. Our industry has been forced to adapt, and we expect an overall better expense environment in the future, along with less supply growth than what was anticipated before the pandemic in a majority of our markets. To conclude my remarks, I am pleased with how our team and our operator's teams have persevered in the face of adversity. I would like to again thank them for their agility and resilience throughout the year and their continued dedication to the health and safety of guests and our operator's employees at our hotels and resorts. I will now turn the call over to Barry.