Xenia Hotels & Resorts, Inc.

Hello everyone and welcome to Xenia Hotels and Resorts third quarter 2024 earnings conference call. My name is Lydia and I'll be your operator today. After our prepared remarks, there'll be an opportunity for you to ask some questions. If you'd like to queue up, you can do so by pressing star followed by one on your telephone keypad. I'll now hand you over to Aldo Martinez, Manager Finance to begin. Please go ahead.

Thank you, Lydia. And welcome to Xenia Hotels and Resorts third quarter 2024 earnings call-in webcast. I'm here with Marcel Verbas, 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 operating trends and capital expenditure projects. And Atish will conclude today's remarks with commentary on 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 in or implied by our comments. Forward-looking statements in the earnings release that we issued yesterday afternoon, along with the comments on this call, are made only as of today, November 7, 2024, We undertake no obligation to publicly update any of these forward-looking 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 in our third quarter earnings release, which is available on our investor relations section of our website. The property level information we will be speaking about today is on a same property basis for all 31 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, Alda, and good morning to everyone joining our call today. Before discussing our third quarter results, I would like to first acknowledge the extraordinary efforts of our project management team as we achieved an extremely important company milestone last week with the up-branding of the former Hyatt Dream Team Scottsdale through the spectacular Grand Hyatt Scottsdale Resort. In addition to the pool complex and its food and beverage amenities that were completed earlier in the year, We have now also completed the renovation of the guest rooms, the spa, the existing meeting space, the lobby, the Grand Vista Lobby Bar, and the newly created signature restaurants. These exciting new restaurants include Mesa Central, a southwestern-themed three-meal restaurant, Tikitaka, a global small-place concept including a sushi bar, and the resort's premier restaurant, La Zazana, an upscale modern Italian steak and seafood concept all in collaboration with celebrity chef Richard Blais. The resort officially was rebranded as Grand Hyatt Scottsdale Resort on November 1st, and we are excited about the future of this outstanding property in one of the most appealing resort locations in the country. Now turning to our financial results. For the third quarter of 2024, the company had a net loss of $7.1 million. Adjusted EBIT IRA was $44.3 million, and adjusted FFO per share was 25 cents. Results came in below our expectations for the quarter, as a number of factors negatively impacted the portfolio during the quarter. Lever demand continued to normalize, and although hurricanes Debbie, Francine, and Helene did not cause significant damage at any of our properties, they did negatively impact demand at most of our properties in the southeast in August and September. combination of overall software leisure demands and the hurricane impact at our hotels in the southeast we're largely responsible for the rest of our declines we experienced at our hotels in san diego nashville new orleans key west napa savannah and charleston additionally renovation disruption during the quarter specifically in scottsdale was greater than we previously projected Same property REFAR for a 31 hotel portfolio increased by 1.5% for the quarter, while REFAR increased by 1.1% when excluding Scottsdale. Same property occupancy increased by 320 basis points, while ADR decreased by 3.3%. REFAR growth was driven by continued strong results at our recently renovated Grand Bohemian Hotel Orlando, Canary Hotel Santa Barbara, and Hotel Monaco Salt Lake City. Additionally, our three Houston hotels, our Atlanta properties, and our Ritz-Carlton's in Pentagon City and Denver outperformed the remainder of our portfolio in the third quarter. As we have discussed in prior earnings calls, we expected Scottsdale performance to become a tailwind during the third quarter. And this partially materialized as our two resorts in the Phoenix-Scottsdale market achieved a combined 11.1% REF PAR increase compared to the same period last year. This increase was lower than we previously projected since the impact of the Grand Hyatt renovation was greater than anticipated during the quarter. Having now completed the components that most negatively impacted the guest experience through the month of October, we expect to see significant year-over-year ref bar gains in Scottsdale in the months ahead. On a same property basis, third quarter same property hotel EBITDA of $48.1 million was 6.3% below 2023 levels, and hotel EBITDA margin decreased to 100 basis points. Excluding Scottsdale, third quarter hotel EBITDA decreased 3.4%, and hotel EBITDA margin decreased by 144 basis points. In a continuation of what our portfolio experienced in the second quarter, expense pressures, although they are moderating a bit, and the increase in occupancy coupled with the ADR decrease drove the margin decline for the third quarter in comparison to last year. Consistent with demand trends over the last few quarters, group and corporate transient demand remained relative bright spots during the quarter. Same property group room revenues, excluding Scottsdale, increased 3.8% as compared to the third quarter last year. And midweek corporate transient occupancy continued its positive momentum. Turning to our capital expenditure projects, we now project that we will spend between $130 and $140 million on property improvements during the year, an increase of $5 million compared to our prior estimate. This is a result of the timing of payments, as well as an increase in smaller projects executed at the property level that we now expect to be completed by the end of this year. We continue to expect to spend $70 to $75 million on the Scottsdale renovation in 2024. We still anticipate substantial completion of the project, including the ballroom and pre-function space expansion by the end of this year, with just some exterior work that is not expected to impact the guest experience remaining to be completed in early 2025. Now that most of the major components of the transformative renovation have been completed and the property has officially relaunched as Grand Hyatt Scottsdale Resort, the overall guest experience has been significantly enhanced. the construction of the new ballroom and pre-function space is progressing as planned without negatively impacting the overall operations and feel of the resort. We are continuing to expect that the resort will be able to host groups in this outstanding new space in January. We experienced greater disruption during the third quarter than previously estimated as a result of the lobby and restaurants not being accessible to guests during the quarter. Additionally, the opening of the new signature restaurants and bars was delayed until November, which not only impacted food and beverage revenues, but also the overall guest experience and the official launch under a new brand. As a result, we have increased our estimate of renovation disruption on our adjusted EBIT IRA in 2024 by $3 million. We are thrilled that we have completed the majority of the project at this time. and while the financial results will be ramping up over the next several quarters, this phenomenal upgraded resort is expected to be a significant driver for our company's earnings growth over the next few years. Turning to transaction activity, we previously disclosed that we sold the Laurier Hotel and Spa in Alexandria, Virginia, for a sale price of $30 million in early July. As a reminder, this price represented a very attractive 21.3 times multiple on the hotel EBITDA for the 12 months ended May 31st, 2024. We are continuing to analyze potential additions to the portfolio as well as any dispositions that we believe would enhance our earnings growth profile in the years ahead. We are not anticipating any changes to the portfolio composition for the balance of this year. And as we look ahead to 2025, we will continue to patiently evaluate these opportunities in conjunction with our prudent balance sheet management and review of internal ROI opportunities. As we announced in our release yesterday, we have taken another significant step to further solidify our balance sheet and create additional flexibility for the company by upsizing and extending our corporate credit facility. While Tij will provide more detail during his remarks, I would like to take this opportunity to thank our lender group for their continued support of our company's long-term strategy. As we near the end of 2024, we have reduced our guidance for our full-year adjusted EBIT as compared to our forecast after our second quarter results. This is reflective of both our actual third quarter results and our reduced outlook for the fourth quarter. Our fourth quarter outlook has moderated as a result of the impact of Hurricane Milton on our properties in Orlando in October, recent demand trends, and the approximate one-month delay in the relaunch of Grand Hyatt Scottsdale. A teacher will provide additional detail on our updated guidance during his remarks, Despite the negative impacts on October results that I just mentioned, we estimate the same property ref bar increased by approximately 4% in October as compared to the same period in 2023. When excluding Grand Hyatt Scottsdale Resort, we estimate that the October ref bar was of approximately 3.4% compared to last year. These ref bar increases reflect an acceleration compared to results in the third quarter, albeit not to the level we previously projected. While uncertainty exists regarding the overall economic environment and logging industry results in the short term, we continue to have an optimistic view regarding our portfolio performance in the years ahead. We are excited that the bulk of the transformative Scottsdale project is behind us and continue to expect to reap the benefits of this substantial project for years to come. Additionally, we believe that our high-quality portfolio is well positioned to outperform in the years ahead, given its diversified locations, strong brand affiliations, and quality of its room products and amenities. I will now turn the call over to Barry to provide more details on our operating results and capital projects.