Xenia Hotels & Resorts, Inc.

My name is Emily, and I'll be facilitating your call today. After the presentation, there will be the opportunity for any questions, which you can ask by pressing Start, followed by the number one on your telephone keypad. I will now turn the call over to our host, Amanda Bryant, Vice President of Finance. Please go ahead, Amanda.

Thank you, Emily, and welcome to Xenia Hotels and Resorts' fourth quarter 2023 earnings call and webcast. I'm here with Marcel Verbaas, our Chair 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 on our performance. Barry will follow with more details on our operating trends and capital expenditure projects, and Atish will conclude today's remarks on our balance sheet and outlooks. 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 nor 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 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, February 27, 2024, and we undertake no obligation to publicly update any of these forward-looking statements as actual events unfold. You can find a reconciliation of non-GAAP financial measures to net income and definitions of certain items referred to in our remarks in this morning's earnings release and earnings supplemental, which is available on the investor relations section of our website. The property level information we'll be speaking about today is on the same property basis for all 32 hotels unless specified otherwise. 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, Amanda. and good afternoon, everyone. We are pleased to report on our results and achievements in 2023 as we successfully executed against our long-term strategy by further investing in our high-quality, diversified portfolio while remaining focused on working with our operating partners to drive top-line growth and control expenses in a challenging operating environment. During the course of 2023, we invested over $120 million in capital expenditures across the portfolio. all of which was supported by our in-house project management team. We believe that our recent capital projects will enable us to capture significant revenue and income growth in the years to come. Our 2023 portfolio performance was broadly in line with our expectations, despite a challenging economic backdrop. And our fourth quarter financial results allowed us to finish the year near the upper end of our full-year guidance ranges for net income, adjusted EBITRE, and adjusted FFO per share that we provided when we reported our third quarter results. Same property portfolio REF BAR for pool year 2023 increased 3.9% compared to 2022, just shy of the low end of our most recent guidance, as November and December REF BAR were a bit softer than expected. Our 2023 REF BAR increase was driven by a healthy 250 basis point occupancy gain, as average daily rate was essentially flat. If we exclude Hyatt Regency Scottsdale Resort and Spa at Ganey Ranch, where the transformational renovation is well underway, same property ref bar for the remainder of the portfolio increased a solid 6.4% as compared to 2022. In 2023, 23 out of the 32 hotels in our same property portfolio achieved ref bar growth as compared to 2022. graph are increased by double-digit percentages in seven of our 22 markets, including Portland, Houston, Dallas, San Francisco, San Jose, Nashville, and Atlanta. We expect most of these markets to continue to experience strong growth in 2024 as well. On the same property basis, 2023 hotel EBITDA of $271.5 million was 1.5% below 2022 levels. and margins were 153 basis points lower as compared to 2022. Excluding Hyde Beach, East Scottsdale in both years, same property hotel EBITDA increased 3.5% and margins decreased just 92 basis points in 2023 as compared to 2022. We are pleased with this result given the inflationary pressures on the overall economy and our industry particularly during the year. Now, turning specifically to our fourth quarter results, this morning we reported net income of $7.6 million, adjusted EBIT IRA of $59.4 million, and adjusted FFO per share of 41 cents. Despite significant disruption from the Hyatt Regency Scottsdale renovation throughout the quarter, as well as disruption from our Grand Bohemian Orlando renovation early in the quarter, our fourth quarter adjusted FFO per share of 41 cents was flat compared to the same period in the prior year. This was partially due to a lower share count resulting from our substantial share repurchase activity during the quarter and the year. Our same property, Ref Bar, for the fourth quarter decreased 3.4% as compared to 2022. However, excluding high-agency Scottsdale, Ref Bar for the quarter increased 1.2%. On a same property basis, fourth quarter hotel EBITDA of $63.7 million was 8.4% below 2022 levels, and hotel EBITDA margin decreased 162 basis points. Excluding Hyadrie C. Scottsdale, fourth quarter same property hotel EBITDA increased 2.5%, and hotel EBITDA margin decreased just 10 basis points. The trends across our portfolio continue to indicate that our demand segmentation mix is reverting towards pre-pandemic levels, as group and business transient demand recover, and leisure demand normalizes. In the fourth quarter and the full year, same property group room revenues, excluding High Regency Scottsdale, increased 4% and 16% respectively as compared to 2022. We also saw continuous strength in business transient demand over the year, as evidenced by a healthy recovery in midweek occupancy. And finally, leisure demand continued to normalize, which was not a big surprise given the incredible strength in domestic leisure demand coming out of the pandemic. This retracement was evident in the lagging performance of some of our more leisure-dependent assets and markets in the fourth quarter. As for our capital allocation strategy, included in our $120 million in capital expenditures in our portfolio in 2023 were major renovations at Kimpton Canary Hotel Santa Barbara, Kimpton Hotel Monaco Salt Lake City, and Grand Bohemian Orlando, In addition to other projects, such as the creation of a Miraval Life and Balance Spa at Park Hyatt Aviara. As you are all well aware, we also commenced the transformative renovation and up branding of Hyatt Regency Scottsdale in June of last year. We are excited that this project is progressing on time and on budget to date. We continue to believe strongly that the property will be able to compete even more effectively in the Phoenix Scottsdale luxury resort market, after its relaunch as the luxury Grand Hyatt Resort Scottsdale by the end of the year. Perry will provide a detailed update on our progress on this important project in his remarks. Importantly, we balanced these investments in our portfolio with meaningful returns to our shareholders. In 2023, we returned approximately $177 million to shareholders through nearly $133 million in share buybacks and roughly $44 million in common dividends. Looking ahead, we are cautiously optimistic as we start 2024. We believe that our recent and ongoing ROI investments will yield meaningful results in 2024 and in the years to come. We expect to invest another $120 to $130 million in capital projects this year, with the Hyatt Regency Scottsdale renovation expected to account for $65 to $70 million of this total amount. There's important projects that start to drive benefits later this year. as the guest rooms and various other components are completed. Also in 2024, we expect to generate earnings growth from our recently renovated properties, some of which have already started to see notable share gains in the months coming out of renovation. While Barry will provide more detail on our capital projects, I would like to note that we expect overall renovation disruption in the portfolio to be a bit less than in 2023. despite continued significant renovation disruption at Hyde Regency Scottsdale. The majority of the capital expenditures we will make in 2024 outside of the Scottsdale project are expected to be significantly less impactful to the guest experience than the major renovations we completed in 2023. Our initial 2024 outlook is based on a range of 2% to 5% same property REF bar growth, or 3.5% at the midpoint. Excluding Hyatt Regency Scottsdale, we expect the portfolio to produce 2.5% to 5.5% REF PAR growth. Embedded in this outlook are opportunities for further occupancy gains. In 2023, our same property portfolio, excluding Scottsdale, occupancy was still approximately 10 points behind 2019 levels, despite a 2.5 point increase in occupancy during the year. In addition to growth from recently renovated properties, our greatest opportunities for growth in 2024 include continued strong performance at our hotels that cater to group and business transient customers. This includes our two most recent acquisitions, W. Nashville and Hyatt Regency Portland at the Oregon Convention Center, both of which should generate above average levels of REFAR growth as compared to our overall portfolio. Additionally, in 2024, We expect strong REFAR growth at our properties in Orlando, Atlanta, and our recovering Northern California markets, San Francisco and San Jose. Excluding Scottsdale, we crossed into 2024 with approximately 8% greater group rooms revenue on the books than we did for 2023 at the end of 2022. We also anticipate continued recovery in business transient demand, which should drive further midweek occupancy gains. We expect leisure transient demand to remain relatively stable this year after some retracement last year. ATHES will provide additional details around our 2024 outlook, including our expectations for seasonality and impact from our ongoing renovation activity and its prepared remarks. We are off to a solid start in 2024. According to the date through February 22nd, 2024, we estimate that excluding Scottsdale same property of Refbar increased 4.9% as compared to the same period in 2023. When including Hydrogen C. Scottsdale, which delivered extremely strong results in early 2023 due to the Super Bowl and strong overall demand in the markets, quarter-of-the-date Refbar through February 22nd is down 0.5%. Given its very strong performance through May of last year and the renovation disruption this year, Hydrogen C. Scottsdale will be a drag on Refbar growth through the first half of the year. after which the comparisons will become significantly more favorable. To wrap up, I'm very proud of all the great work our team accomplished in 2023. We not only delivered results broadly in line with the expectations we set at the start of the year, but we also invested meaningfully in our portfolio in ways that we believe will enhance our growth profile in the years ahead. All this was accomplished during a time when we also returned substantial levels of capital to shareholders. through a combination of share repurchases and dividends. And as we announced this morning, we are continuing this into 2024 as our board of directors authorized a 20% increase in our quarterly cash dividends to 12 cents per share for the first quarter. I will now turn the call over to Barry to provide more details on our operating results and our capital projects.