Xenia Hotels & Resorts, Inc.

Hello and welcome to the Xenia Hotels and Resorts Third Quarter Earnings Conference Call. My name is Juan and I will be coordinating your call today. If you would like to ask a question during the presentation, you might do so by pressing star 1 on your telephone keyboard. If you have joined us online, you can press the flag icon on your web browser to ask a question. I will now hand over to your host, Daniel Barcon, Vice President of Finance for Beijing. Daniel, please go ahead.

Thank you, Operator. Good afternoon and welcome to Xenia Hotels and Resorts Third Quarter 2021 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 Atisha, our Executive Vice President and Chief Financial Officer. Marcel will begin with discussion on industry fundamentals, our quarterly performance, and an update on our portfolio strategy. Barry will follow with more details about our operating results, recent operating trends, and status of our capital expenditure projects. And Atish will conclude our remarks with an update on our balance sheet. 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 their actual results to differ materially from those expressed in 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, November 2, 2021, and we undertake no obligation to publicly update any of these forward-looking statements as actual events unfold. You can find a reconciliation of our non-GAAP financial measures to net income and definitions of certain items referred to in our remarks in this morning's earnings release. The property level information our executive team will be speaking about today is reported on the same property basis for 34 hotels, which excludes the Hyatt Regency Portland. An archive of this call will be available on our website for 90 days. I will now turn it over to Marcel to get started.

Thanks, Danielle, and good afternoon to all of you joining our call today. The U.S. lodging industry continues on its path to recovery in the third quarter, as increased COVID vaccinations and continued strong leisure demands drove the highest occupancy the industry has experienced since the beginning of the pandemic. The U.S. RECPAR for the third quarter of 2021 decreased by only 4.8% compared to 2019, comprised of an approximate 6-point decrease in occupancy and 3.8% increase in ADR. The luxury and upper upscale segments have lagged lower tier chain scales in terms of the recovery to 2019 occupancy levels and experienced occupancy declines of 19.8 points and 20 points respectively compared to the third quarter of 2019. However, luxury ADR increased 15.9% and the upper upscale ADR increased 0.4%. The rate increases in the luxury segment have been impressive. and the positive signs we are starting to see as it relates to business transient and group demand certainly give us cause for optimism for a robust recovery in the segments where our portfolio is positioned. Similar to the rest of the logging industry, our portfolio faced some headwinds as the third quarter progressed due to resurgence of COVID cases from the Delta variants, a seasonal decline in leader demand, and a tougher comparison to 2019 in September due to the timing of the Jewish holidays. Given this backdrop, we were pleased with the 12% sequential improvement in our same-property RECPAR over the second quarter, especially since the third quarter has historically been our portfolio's toughest due to seasonality within our top markets. We were also happy to see that RECPAR declines compared to the same quarter in 2019 continue to moderate and that despite cancellations that were likely linked to the emergence of the Delta variant, business transactions and group demand appeared to increase as the quarter progressed. This trend has continued into the early part of the fourth quarter, with weekday demand continuing to strengthen. During the third quarter, we recorded a net loss of $22.2 million. However, adjusted EBITRE and adjusted FFO per share each remained positive at $35.4 million and 13 cents, respectively. Our year-to-date adjusted FFL also turned positive as a result of our third quarter performance. We were particularly encouraged that 33 of our hotels and resorts achieved positive hotel EBITDA during the quarter. Our same property portfolio generated a hotel EBITDA margin of 23.8% for the quarter as a result of a continued focus on cost controls and aided by flow through from cancellation fees recognized during the quarter, as well as a shift in revenue mix at our properties. which reflects the higher contribution from rooms revenue than historical averages. Our same property record for the third quarter was $123.70, which represents a 23.1% decline through the third quarter of 2019. A substantial improvement from the 64.3% and 38.7% declines in the first and second quarter. Our managers did an excellent job maintaining rate integrity which resulted in same property ADR of $224.54 for the quarter, a 6.5% increase compared to the third quarter of 2019. An impressive 24 of our hotels and resorts achieved ADRs that surpassed those reached during the same quarter in 2019.