Xenia Hotels & Resorts, Inc.

you can register to ask questions by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by two. I will now hand you over to your host Aldo Martinez, manager of finance to begin. Please go ahead when you're ready.

Thank you Carla and welcome to Zinnia Hotels and Resorts second quarter 2025 earnings call and webcast. I'm here with Marcel Verbaas, our chair and chief executive officer, Barry Bloom, our 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 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 10k 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, August 1st, 2025, and 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 second quarter earnings release, 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 30 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, Aalo, and good morning, everyone. We are pleased with our second quarter performance as our portfolio delivered results that meaningfully surpassed our expectations. Both revenues in Hotel Ibiza increased significantly compared to the same period last year, which is especially encouraging during a time when industry performance continues to be choppy in an uncertain microeconomic climate. Performance at our recently renovated and up-branded Grand Hyatt Scottsdale Resort continues to be on track and was the main driver of our 4% same property ref bar increase for our 30 hotel portfolio for the quarter. This 4% increase was driven by 140 basis point increase in occupancy and a 2% increase in average daily rate. As mentioned in our release this morning, we saw very strong group business demand throughout the portfolio during the quarter. Strengthening group business drove substantial food and beverage revenue increases at a number of our properties, which greatly contributed to an 11% increase in same property total ref bar compared to the second quarter of last year. For the second quarter of 2025, we reported net income of $55.2 million, adjusted EBIT RE of $79.5 million, and adjusted FFO per share of $0.57, which was an increase of .6% compared to the same quarter last year. Second quarter same property hotel EBITDA of $84 million was .2% above 2024 levels, and hotel EBITDA margin increased 269 basis points. Excluding Grand Hyatt Scottsdale, second quarter hotel EBITDA increased .5% and hotel EBITDA margin increased 148 basis points. The majority of our second quarter outperformance was the result of outsized gains in highly profitable catering revenues that substantially exceeded our expectations at a majority of our group-oriented hotels. When coupled with lower than expected expense growth across our portfolio, this fueled solid operating margins and hotel EBITDA growth. Additionally, our EBITDA margin benefited from the timing of approximately $1.5 million in property tax refunds that were received during the second quarter. For the second quarter, same property group room revenues increased .6% as compared to the same period last year, and increased by .6% when excluding Grand Hyatt Scottsdale. Corporate transient demand continues to recover slowly, while leisure demand has continued to normalize over the past several months and into the summer season. Performance at the newly up-branded Grand Hyatt Scottsdale Resort has been encouraging, and revenues and bottom-line performance are tracking in line with our underwriting expectations thus far, although leisure demand in the Phoenix Scottsdale market has been a bit softer this year. The trajectory of group demand continues to improve, both in the quarter and for the future. The property saw group market share improve each month during the second quarter, which culminated in the resort exceeding 2019 group room nights and revenue during the quarter, and achieving a buff fair share in its competitive set for the first time post-renovation in June. The group's success translated to extremely strong bank and catering revenues, with the resort producing the highest such revenues on record for the month of June. We are pleased with the progress that has been made thus far, and remain confident in our investment thesis and the earnings growth that we expect this outstanding property to deliver over the next several years. In addition to the strong growth in Scottsdale during the second quarter, we saw outside the red bar growth in Pittsburgh, Orlando, and our California markets. Fairmont, Pittsburgh had an extremely strong quarter, which was aided by the US Open taking place at Oakmont in June. In our California markets, we experienced particularly strong red bar growth in Santa Barbara, San Francisco, and Santa Clara. On the transaction side, on our last earnings call, we discussed the sale of Fairmont Dows, which was completed early in the second quarter. As a reminder, we sold the hotel for $111 million, generating an unlevered IRR of .3% over our approximately 14-year hold period. We estimate that approximately $80 million of near-term capital expenditures would have been required to maintain and improve the hotel's market position, and we believe that the sale of the hotel was a superior capital allocation decision for the company. Now, turning to our capital expenditure projects, we continue to project that we will spend between $75 and $85 million on property improvements during the year, which as you will recall is an approximately $25 million reduction from the amount we projected at the start of the year. We strongly believe we acted prudently to reduce our capital expenditures in an environment in which tariffs on imported goods remain uncertain and could be meaningful. Our project management team has done an outstanding job in evaluating all ongoing and upcoming projects to mitigate any impact to the extent possible, including identifying alternative sources for goods and materials. Barry will provide an update on our ongoing and upcoming capital project during his remarks. Looking ahead, the second half of the year is shaping up in line with our prior expectations. Group business continues to be a bright spot and is expected to be particularly strong in the fourth quarter. Meanwhile, corporate transient demand is continuing to recover slowly, while leisure demand continues to normalize, consistent with our expectations at the start of the year. We estimate that July ref bar growth for our 30 hotel portfolio was slightly negative compared to the same period last year. While this is a slowdown from the ref bar growth we experienced in the second quarter, we had anticipated this as the summer months are more dependent on leisure demand that, as we expected, is a bit weaker than last year. Additionally, ref bar growth was very strong in the Houston market in July of last year in the aftermath of Hurricane Barrel. When we exclude our Houston hotels, we estimate that ref bar for the remainder of the portfolio increased by approximately 3% in July. Given recent trends, we have increased our full year guidance for adjusted EBIT.RE and adjusted FFO to reflect our outperformance in the second quarter and an unchanged outlook for the second half of the year. While we expect revenue growth to be muted in the third quarter, we are anticipating a stronger fourth quarter as our group revenue pace for the quarter continues to be highly encouraging. We believe that owning a portfolio of luxury and upper upscale hotels and resorts that are not heavily dependent on inbound international and government demand is particularly beneficial in the current economic environment. And we saw the benefits of this in our second quarter results. We continue to be optimistic regarding future growth prospects for our high quality portfolio and our ability to drive shareholder value through superior capital allocation decisions, such as the successful disposition of Fairmont Dallas and the repurchase of almost 6 million shares of our common stock a year today at an attractive valuation. I will now turn the call over to Barry to provide more details on our operating results and capital projects.

Thank you, Marcel. Good morning, everyone. For the second quarter, our same property portfolio rep par was $195.51, based on occupancy of 72.3%, an average daily rate of $270.42, an increase of 4% as compared to the second quarter in 2024. Excluding Grand Hyatt Scottsdale, second quarter rep par was $194.87, an increase of .4% as compared to 2024. This increase reflected a decrease of 40 basis points in occupancy for period and an increase of .9% as compared to the second quarter of 2024. Our top performing hotels in the quarter were Grand Hyatt Scottsdale, with rep par up nearly 150%, Fairmont Pittsburgh up almost 30%, Kimpton Canary Santa Barbara up 10%, Park Hyatt Aviara, Hyatt Regency Santa Clara, and Marriott San Francisco Airport each up approximately 8%, and Hyatt Regency Grand Cypress up just over 7%. Strengthening group business and continued improvement in corporate demand was the driver behind the success of most of these properties. Hotels that experienced rep par weakness compared to the second quarter of 2024 included Royal Palms, which suffered from softer leisure demand, both Portland hotels, which experienced an anticipated decline in citywide convention demand, Marriott Dallas, which lapped last year's solar eclipse and saw softer citywide convention demand, and Weston Oaks and Galleria, which experienced softer in-house demand. Looking at each month of the quarter compared to 2024, April rep par was $207.24, up 3.7%, May rep par was $194.80, up 3%, and June rep par was $184.50, up 5.5%. We've seen continued recovery in corporate and group rates, and we continue to achieve significant rep par growth across the portfolio on Tuesday and Wednesday nights, with rep par growing at .6% and .6% for the quarter respectively, with growth in both occupancy and rate. This growth was mitigated by rep par declines on weekends and Monday nights, with occupancy declines related primarily to softening leisure demand. Business from the largest corporate accounts across our portfolio continues to grow significantly, although still meaningfully behind 2019 levels. We note that compared to 2019, which excludes Hyatt Regency Portland and W Nashville, during the second quarter, daily occupancy still trailed by approximately six to eight occupancy points midweek, and the corporate business from small and medium-sized accounts has recovered much more significantly. Recent performance in our corporate transient-driven hotels gives us confidence that we still have significant growth ahead, particularly during high business travel demand periods. Group business continues to be a bright spot across the portfolio. For the second quarter, excluding Grand Hyatt-Scottsdale, group room revenues were up .6% compared to the second last quarter. This growth was driven more significantly by room nights, which were up 6.5%, and by average rate, which was up 1%. Food and beverage revenue from groups was particularly strong in the second quarter, as high-quality corporate groups continued their trend toward higher-end catered events. Now, turning to expenses and profit. Second quarter same property total revenue increased 11% compared to the second quarter of 2024. Hotel EBITDA margin improved $248.8 million by 269 basis points, resulting in $84 million, an increase of 22.2%. Since Grand Hyatt-Scottsdale was undergoing its transformative renovation last year, the following analysis is presented for the remainder of the same property portfolio, which had excellent results for the quarter. Hotel EBITDA was $77.4 million, an increase of .5% on a total revenue increase of 5.9%, resulting in a margin improvement of 148 basis points. Room's department expenses increased just over 3% on .4% red part growth. Food and beverage revenue growth is outstanding, with overall growth of .7% and banquet revenue growth of nearly 20%, driven by higher-quality corporate group business compared to the second quarter of last year, having margin improvement of over 300 basis points. Other operating department income, including spa, parking, golf revenues, was up 5%, and total revenue increased by 5.9%. In the undistributed departments, expenses in ANG and sales and marketing were very well controlled. ANG declined by .1% compared to last year, while sales and marketing expenses grew by just 2.1%, reversing the increasing trend we've experienced over the quarter. We invested $18.5 million in portfolio improvements, which brings our total for the first half of the year to $50.8 million. These amounts are inclusive capital expenditures related to the substantial completion of the transformative renovation of Grand Hyatt Scottsdale. We made significant progress during the quarter on select upgrades to guest rooms at a number properties, including Renaissance Atlanta Waverly, Hyatt Central Key West, Hyatt Regency Santa Clara, Grand Bohemian Mountain Brook, Charleston, and Kimpton River Place. This work will continue throughout the year and is being done based on hotel seasonality and is expected to result in minimal disruption. We expect to commence work in the fourth quarter on a limited room renovation at Fairmont Pittsburgh and a renovation of the M Club at Maryatt Dallas downtown. At Grand Hyatt Scottsdale, we began work on improvements to the building facade and parking lot in the second quarter, with completion expected in the third quarter. Additionally, we continue to perform significant infrastructure upgrades at 10 hotels this year, including facade waterproofing, chiller replacements, elevator and escalator modernization projects, and fire alarm system upgrades. With that, I will turn the call over to Atish.

Thanks

very

much, Barry. I will provide an update on two items this morning, our balance sheet and 2025 guidance. At quarter end, we had approximately $1.4 billion of outstanding debt. Just over three quarters of our debt was hedged or hedged to fix. Our weighted average interest rate at quarter end was 5.7%. Additionally, at quarter end, our leverage ratio was approximately five times trailing 12-month net debt to EBITDA. Pro forma for the sale of Fairmont Dallas, our leverage ratio was 5.2 times. We expect our leverage ratio to further decline as Grand Hyatt Scottsdale continues to stabilize. As a reminder, we have no preferred equity or senior capital. Our long-term leverage target is in the low three to low four times range. Our debt maturities continue to be well-loved, and at quarter end, our debt had a weighted average duration of 3.7 years. The vast majority of our properties, in fact, 27 of our 30 hotels are unencumbered. As to liquidity, we finished the second quarter with $173 million of available cash, excluding restricted cash. Our $500 million revolver remains undrawn. Therefore, total liquidity was $673 million. Our board authorized a second quarter dividend of 14 cents per share. If annualized, this reflects an approximate .5% yield on our current share price. As to payout ratio, if annualized, this reflects a payout ratio of just under 50% of funds available for distribution or FAD. Our long-term target is a payout ratio of 60 to 70% of FAD, consistent with our pre-pandemic payout range. During the quarter, we repurchased $35.7 million of common stock. Since the year began, we have repurchased $71.5 million of stock, which equates to .6% of our outstanding shares at year end 2024. Our -to-date weighted average buyback price is $12.58 per share. We have $146 million of remaining capacity under our share repurchase authorization. We continue to believe our shares are a good value, given the outlook, our balance sheet, and relative to other uses of capital. Turning next to my second topic, our current 2025 full-year guidance. We are increasing our current full-year guidance for adjusted EBITDA RE by $8 million at the midpoint to $256 million. The increase reflects the carry through of our second quarter B, with no change in overall outlook for the second half. As to the specifics of each of the third and fourth quarters, and this is important from a modeling perspective, our cadence of earnings has evolved slightly. Our expected adjusted EBITDA RE weighting is as follows. In the third quarter, we expect to earn about 15% of full-year adjusted EBITDA RE, and in the fourth quarter, we expect to earn a quarter of full-year adjusted EBITDA RE. The rationale for this slight change to weighting is threefold as follows. First, we have fine-tuned quarterly estimates as we have a better grasp on the seasonality of our portfolio. Second, the timing of approximately $1.5 million in tax refunds moved from the third quarter to the second quarter. And lastly, relative to our prior forecast, our properties expect a SMID soft or leisure demand in the third quarter and a touch better group demand in the fourth quarter. Moving ahead to our REVPAR outlook, the midpoint is unchanged at .5% growth. Exclusive of Grand Heights, Scottsdale, we expect REVPAR to grow .5% for the full year, which is consistent with our prior guidance. Our implied second half REVPAR guide of approximately .6% growth at the midpoint

reflects

a flattish summer followed by better growth in the fall, again driven by Scottsdale. Exclusive of Scottsdale, our full year guidance implies less than 1% back half REVPAR growth across the portfolio. The key months for us are September and October, and we expect our strong group-based provide compression to enable our properties to optimize the transient segment. Turning to group business, which by way of reminder was about 35% of our overall mix in 2024, which is up a couple points versus prior years, our outlook continues to be strong. As of the end of June, group room revenue pays for the second half is up 16%. Excluding Grand Heights, Scottsdale, it's up 7%. While this reflects an expected moderation from a few months ago, it sets us up well for the second half, particularly the fourth quarter, and we remain on track to have a stellar group year. Looking ahead to 2026, group revenue pace is up with over 40% of our estimated group rooms revenue for 2026, definite as of June 30th. Exclusive of Scottsdale, group room revenue pace is up in the low teens percentage range for 2026. Inclusive of Scottsdale, group pace is up in the mid-teens percentage range. We are seeing strength across the portfolio, and this speaks to the quality of our assets, the investments we have made in meeting space and group amenities, and the power of branded hotels in attracting group demand from the association, corporate, and leisure segments. So, again, early indications are that 2026 will be a strong group year. Over time, we believe the group segment can reach the high 30% range of our rooms revenues. Given the increasing importance of non-rooms revenue that is driven by this group demand, we have introduced total RevPAR disclosure in the table on page three of our earnings release. Moving ahead to Hotel EBITDA margin, the drivers of second quarter strong gain were A, banquet and catering profitability, and B, expense controls on the undistributed areas of the P&L. We expect these dynamics to continue in the second half, albeit at a lower pace. In addition, second quarter margin benefited from property tax refunds, which boosted margins by approximately 60 basis points in the quarter. Overall, we expect second half Hotel EBITDA margin to be flat to last year. Excluding Scottsdale, we expect Hotel EBITDA margin for the second half to decrease approximately 100 basis points. Our guidance for interest expense, income tax expense, capital expenditures are unchanged. We expect cash G&A expense to increase by $1 million due to higher incentive compensation because of the increase of full year earnings. Finally, our adjusted FFO per diluted share guidance midpoint is at $1.73, which is an increase of 11 cents at the midpoint. This reflects both the increase in adjusted EBITDA as well as the beneficial impact of share repurchases. Relative to 2024, our guidance reflects over 8% growth in adjusted FFO per share. In closing, our strong performance in the second quarter reflects many of the positive attributes of our portfolio. We have a high quality premium all branded collection of assets that benefit from group as well as transient demand. We are seeing the benefit of having multiple earnings at the property level. As we look forward, we are encouraged by the supply outlook. Annual U.S. lodging supply growth for higher end hotels is expected to fall from the .5% range at present to 2 tenths of 1% by 2028.

Overall

industry supply growth for 2028 is even lower at 1 tenths of 1%. If this comes to fruition as projected, it will make for the best backdrop for top line growth that we have had in the last two decades. That concludes our prepared remarks and with that, we will turn the call back over to Carla to begin our question and answer session.

Thank you. We will not begin the question and answer session. If you would like to ask a question, please press star followed by one on your telephone keypad. If you change your mind, press star followed by two. When preparing to ask your question, please ensure your devices are muted locally. We will make a quick pause here for the questions to be registered. The first question comes from David with Jeff.

Hi. Good morning, everyone. Thanks for all the details and thanks for taking my question. I wanted to just float the conversation about stock buybacks. They obviously are not a broad-based cure-all, but given that you've come through a CAPEX cycle clearly quite well, and I think the valuation discussions I think have been had many times over, how are you thinking about buybacks and potentially the prospect of maybe ramping those?

Hey, David. Thanks for the question. I think we continue to think buybacks are a good tool to draw shareholder value. I think you've seen us be very active on that front, maybe more so than others in the peer set even, and even this year. We've bought a large amount of our float back thus far at a price that's roughly in line with where we trade today. I think we remain very open to it. We've been very active with buybacks. On the counterbalance, there are obviously some, including our leverage level and being mindful of that. I would say we continue to utilize it as a tool to drive value for our ownership base.

Just one more broad-based follow-up. So far, we've obviously come through earnings, and I guess I would ask your collective help in classifying some of the dispersion we've seen in outlooks where you obviously have fully loaded new assets that are helping group, but some of the group commentary has been mixed. Leisure transients seems to be a bit mixed. Some of the BT is mixed. How might you help us explain what we're seeing out there?

Yeah, sure, David. From my perspective, really focusing on our portfolio, obviously, we're not very dependent on large citywide conventions. I think some of our peers benefited from that a little bit last year in some of the markets where they have a little greater concentration than we have. So we didn't necessarily benefit from a great group set up last year, we've had a really good group set up this year. And also going into next year, as Atish talked about a little bit, kind of the early numbers on our pace for next year. So we've obviously invested a good amount of money over the last several years, too, in upgrading a lot of our meeting facilities at some of our larger hotels. The new ballroom that we created at Tyre, Regency, Grand Cypress, clearly what we did here very recently at Scottsdale, significantly expanding the ballroom space there. But we've spent a good amount of money operating our other facilities as well. So I think it's set us up well for really capturing a lot of the island corporate business, corporate group business. We're also seeing a bit of a pick up now in the associations on the group side. So for us, as we got into the year, and I mentioned this a couple times in my prepared remarks, the way things are playing out for us are very similar to what our expectations were at the beginning of the year, which was a great group set up, seeing this kind of continued, albeit relatively slow, but a continued improvement on the corporate transient side and the midweek business. And we expected some softening and leisure demand. And we've definitely seen that in the early part of the summer. Now, we obviously hear a lot of the commentary, too, from other travel companies, including some of the airlines, talking about expecting to see a bit of a pick up as we get into August, September. And we certainly hope to see some of the benefit of that. But as I said, the way things have played out for us this year are very much in line with what we expected at the beginning of the year.

Got it. Thank you so much. Appreciate it.

Thank you. The next question comes from Ari Klein with BMO Capital.

Thanks, and good morning. Out of room spend seems to be a lot better than expected in the second quarter. And I guess as you look out to the second half of the year, while the rep par growth expectations haven't changed, have your expectations around the out of room piece changed? Or were there some benefits in the second quarter that may not necessarily be repeatable?

Well, it was thanks, Ari, for a question. It was very strong for us in the second quarter, and certainly was a bit of a surprise to the upside. We obviously had a good group pace going into the quarter and good catering pace. But the way that things fell out, there was just a good amount of additional spending from groups that were staying at our hotels or resorts during the quarter. So as we look kind of towards the second half of the year, and Atish talked about that in his comments regarding kind of our updated guidance, you know, the third quarter is a little bit weaker from a group perspective than the fourth quarter. The fourth quarter sets up really well for us. We have very strong group pace in the fourth quarter. So we could certainly see as an area where in the fourth quarter, we'll see some outside spending on the catering and banquet side as well. But it's going to be a lot more muted in the third quarter. That is historically, obviously, a driven a little bit more by leisure anyway, but also in the way that the seasonality of our portfolio sets up is just the weakest quarter from a seasonality standpoint. So I wouldn't expect to see a lot of that outside spending in the third quarter, but to have some potential for that in the fourth quarter.

Thanks. Maybe just as a follow up on that, the third quarter, anything on the shorter term booking standpoint from that standpoint that you've seen slow that's obviously been something maybe called out by some others. Are you seeing that? And then just on Scottsdale, have your expectations around EBITDA for the year changed from the low 20s that you previously anticipated?

Thanks. Well, let me start with the second one. The expectation for Scottsdale in the low 20s, that has not changed. So we're still, you know, expecting to be in that range. And in the investor presentation we published this morning, we have, you know, kind of the outlook for the next two years provided in there as well. So in the $30 million range next year and the low 40s the year after. To your first question in terms of booking velocity and pace, you know, I think, you know, certainly our guidance reflects kind of a more muted demand on the leisure side. And as we started the year, we thought leisure was going to be down. And I think that's consistent with how we feel today. So I would say that's where you've seen maybe not as much of the transient pick up is on the leisure side in the near term. But we continue to feel good about group and the production that we're doing both in the year and for the future, even, you know, in recent weeks. I don't know, Barry or Marcel, do you have anything to add on

this? No, I mean, I think you summarized that well.

Yeah, and as it relates to the report, we always knew that July was going to be a little weaker, particularly because of some of the comparisons to last year. And we highlighted some of the strength we saw in Houston July of last year. Clearly, these demand is a little softer like we talked about. The group demand is not quite as robust in a month like July in our portfolio with the seasonality that we have in our portfolio. So that's kind of the third quarter shaping up. I'll add one thing to the Scottsdale comment that Atish made, which is, you know, we've seen really good results on the group side at the property, obviously. And I highlighted some of those things that we've seen over the last few months at the property. So we definitely have seen group business be a little bit stronger there this year than anticipated at the beginning of the year. And also some that out of room spending that we definitely got in Scottsdale as well. And overall, leisure demand is a little bit softer in the Phoenix Scottsdale market. So that's offset a little bit of that really good strength that we've seen on the group side. So that's why our expectations for the full year, you know, the first year coming out of renovation haven't changed at this point.

Appreciate the color. Thank you. I'm sorry.

Thank you. The next question comes from Austin Bushman with KeyBank Capital Markets.

Thanks. Good morning, everyone. Appreciate all of the details on the group pace you provided. Is this mostly, you know, volume driven, just given kind of the rant that you've talked about with Scottsdale? And I guess what are you seeing on the rate side for group given some of the upgrades to the space that you highlighted, Marcel?

Yeah, I mean, I'll start, you know, terms of the second half, it's two thirds volume, one third rate. And as we look into next year, it's a similar balance, two thirds volume, one third rate. And that obviously does reflect, you know, Scottsdale and picking up additional room nights there. If you strip out Scottsdale, it's a little bit more even half demand, half rate for the balance of the year. So, I'll give you a story on both those. You know, obviously on the demand side, we're seeing not only in Scottsdale, but at other locations where we've made improvements, expansions to meeting space like at Grand Cypress here in Orlando, we're seeing the ability to drive more group business into the property, given additional meeting space. And then on the rate side, yeah, we have made investments that improve the amenity offering and have enabled us to drive better quality group as well. So, a higher rated group.

So those,

you know, we're glad to see kind of, you know, both pieces come together as several of our properties, both experience, both good group demand as well as the ability to better optimize the group business based on the investments we've made.

Yeah. And in the second quarter, and Barry highlighted that in his remarks of the .6% increase in group revenues, excluding group room revenues, excluding Scottsdale, the majority of that, you know, excess of 6% came from group room nights and a little over 1% came from rate. Now, the benefit of that, obviously, as you look at the rest of the portfolio is that it drove so much of the out of room spending. So with more people in the building for these group events, we got a lot more ancillary spending out of that. So it's not just a matter of kind of pushing the ADR on the group room nights. It's obviously when you look at that total ref bar picture where it was very beneficial for us.

And strategically, it was not accidental. We worked the properties last year, some very intentional strategies for 25 and 26 around filling group pockets where group might not have traditionally been. And that's going to drive room nights, but it may come at a lower rate. So where we're booking business in the peak periods, we're growing rates significantly. But a lot of what you see in the blending of that with overall rooms revenue up so much is that the hotels are placing group business in areas that are of the calendar that are harder to fill. So we're very pleased. So we were very, very pleased with that. And the dynamic of the occupancy versus rate is, I think, is exactly where we had hoped it would be looking at this year and looking ahead into 26.

And those are great points. And thank you for the detail. The team also flagged attractive growth in some of your Northern California assets this quarter. Do you see that ramp continuing as you look into the booking window? And just curious if it's accelerating or just a continued steady improvement? And are you starting to see that growth flow through to the bottom line, given maybe some of the expense pressures that have been discussed in some of those markets? Thanks.

Yeah, great question, Austin. We are definitely seeing continued increase in demand in the Northern California markets, particularly from the higher quality corporate demand and particularly on weeknights. That business is no doubt is growing as it relates to kind of the tech profile, the AI profile, all the things that are happening out there. Very, obviously very positive. The challenge out there is that it is very high wage cost market and it's markets where wage pressures have continued probably more so than we've seen in some of the other markets. So we're doing better. We're certainly increasing EBITDA. We're doing better EBITDA margin. But it's really tough to keep ahead of the cost pressures we're experiencing in those two hotels, two specific hotels, High Ridge, Santa Clara, and Marriott, San Francisco Airport. But again, we're pleased with the cadence of growth. We're pleased with what we're seeing on a forward looking basis. And we're pleased with how well our hotels are doing relative to their competitive sets.

And I'll just add for 26, when we look ahead, Northern California in terms of group pace is tracking even better than the low teens that I indicated for the Portfolio X Scottsdale. So certainly those are expected to be drivers over the long term. And we're starting to see that recovery really take more strength as we look forward here and over the next year. Thanks, everybody. Thank

you. Thank you. So just as a reminder to ask your question is start one on your telephone keypad. The next question comes from Jack Armstrong with Wells Fargo.

Hey, good morning. Thanks for taking the question. Can you share an update on any broader changes that you're seeing in consumer behavior? Any shifts in the window or are those generally helpful? And do you have a preliminary read on July?

So, you know, we talked about July, July was, again, was a tough comparison for us based on what we saw there. There's Franklin Houston last year and then some weakening that we did see in demand of the early months of the summer. So I spoke about that a little bit. Our ex-Houston report number was up three percent, we estimate, and including Houston, it was down slightly. So we definitely saw some weakening on the leisure side over the summer, not unexpected, frankly. You know, we had again kind of expected at the beginning of the year. And, you know, we're hoping to see a little bit more strength in August and September. You know, we certainly are hearing the same thing, like I said, from other people in the business that say that, particularly on the airline side that are looking at bookings really kind of picking up as we get into the early, you know, the end of summer, early fall season. So we're hoping to see some of that as well. Obviously, in a portfolio like ours, when you look at transient demands, it doesn't look out particularly far. So it's hard to get a much better sense of where we think transient demand is going to go over the next couple of months. But we think that based on what we're seeing that July might have been kind of the, you know, kind of the lowest part of seeing that type of demand.

Hopeful callers. Thank you. And then on transaction markets, you know, it seems that they've opened up significantly over the last couple of months with the readily available financing. The reason that we're hearing from a lot of folks, you know, with that in mind, are there any changes that you're looking to make to the portfolio kind of over the next year?

Well, you know, as you know, we've historically always been a very transactional company to trying to upgrade our portfolio for the long term, not only from a quality perspective, but from an earnings growth perspective, most importantly. Clearly with where stock price has been, not only for us, but many public companies, and you look at the value that we believe exists in our current portfolio, external growth opportunities have not been at the top of the list just because we think believe that there's so much more value in our existing portfolio. So I don't know that that has changed. We haven't really seen too much of a change in potential acquisition opportunities that have become much more appealing. There probably are some more assets out there now than what we saw, you know, six or 12 months ago, but I don't think that the pricing has gotten to a level that external growth is going to be a big driver for us over the next six to 12 months. You know, hopefully that changes and hopefully those dynamics change a little bit where, you know, on both sides where, you know, if our stock price goes up and you see some better pricing for potential acquisitions, then it may become more appealing, but I don't see that as being a big driver for us in the short term. Now we'll continue to look at some additional dispositions over time. You know, nothing drastic as far as the reshaping of the portfolio, but clearly to the extent that there are some capex needs, particularly at some assets, and we don't believe we're going to get the appropriate return on investment on those, and maybe time to sell some of those assets, but it's not going to be wholesale.

Great. Thank you.

The next question comes from Daniel.

First, just quickly, I know on Scottsdale and you have other room renovations that you mentioned, are there other bigger ROI projects that can be done, any branding opportunities that might be present within the portfolio? Are those conversations that would be started by you, or would you need to be approached by the brands for that?

Well, that's really something that would be something we'd be driving from our side, but not a whole lot of significant opportunities there. I mean, there are some embedded opportunities in certain assets where we can over time look at monetizing some, you know, we have some additional land and a few properties, for example, where we could look at doing something with those, whether it's including adding some amenities to existing hotels or resorts, and or potentially selling some of those land parcels, but it's relatively limited within the portfolio. You know, on the renovation side, as we're kind of looking ahead over the next few years, we don't have any massive projects upcoming. Some of the more -the-mill type room renovations that we've always done throughout our history that could be happening over the next several years, but

we

really expect our total capex numbers to come down a bit over the next few years. Clearly, we brought our number down pretty significantly this year from where we started at the beginning of the year, but that doesn't mean that we've kind of kicked things down the road. We do expect our number to come down over the next few years and kind of settle in more in that 60 to 65 million, probably range of capex, if you look at the existing portfolio.

Yeah, and the only other point I'd add in terms of up branding is, you know, our portfolio is 100% luxury on up or upscale, so there's not as much room potentially to up brand them. We already have a very, very high quality portfolio. So that's also something to keep in mind maybe relative to others that may have lower end assets.

Okay, that's very helpful. And then quickly touching on expenses real quick. Are those pressures, are you lapping tougher comps? If I remember, I think the pressure sort of started half of last year. Are those cost controls and other levers that you've pulled, are those in a good position and just sort of waiting for those to play out or is there more still to tinker with?

There's definitely some lapping of last year, I think, both on the wage side where in general employee costs are not growing the same way they were last year, and we expect that to continue through the rest of the year, although we're not forecasting really significant margin improvements through the second half of the year, in part because the RevPAR environment at Scottsdale is still not terribly desirable. We are seeing the benefit in the middle of the P&L and some of the end distributes, cost savings from some of the the brands have talked about for quite a while, and we're seeing some shifts in some costs related to that actually lower when we do more group business, for example, lower credit card commissions when we're driving more group business and things like that. So obviously we have a careful eye on, but feel good about where we are but are not expecting significant improvements on the expense side through the rest of this year.

Thank you very much. Thank

you. Thank you. So just as a final reminder, it's start one to ask a question. So as we have no further questions in the queue, that does conclude the Q&A portion of today's call. So I will hand back you over to the Chair and CA Yao or Marcel Derbos for any final comments.

Thanks Carla. Obviously we're quite pleased with our results for the second quarter. We believe we put ourselves in a position to outperform here over the next few quarters and going ahead we have a great portfolio and we're really reaping the benefits of that. So look forward to updating you over the next several quarters and I hope you enjoy the rest of your summer.

Thank you everyone. This concludes today's call. You may now disconnect. Have a great day.