Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Xenia Hotels & Resorts Inc (XHR, Financial) reported meaningful RevPAR growth in the second quarter, driven by improvements in corporate transient and group demand.
- The transformational renovation of Hyatt Regency Scottsdale is on track, with excitement building for its relaunch as the luxury Grand Hyatt Scottsdale Resort.
- The company successfully sold the Lorien Hotel & Spa for $30 million, representing a 21.3 times multiple on hotel EBITDA, reflecting prudent capital allocation.
- Group room revenues, excluding Hyatt Regency Scottsdale, increased by 5% compared to the second quarter last year, indicating strong group demand recovery.
- Xenia Hotels & Resorts Inc (XHR) maintains a strong balance sheet with significant unencumbered assets and ample liquidity, positioning it well for future opportunities.
Negative Points
- Hotel EBITDA margin in the second quarter was lower than projected, contributing to adjusted EBITDAre being approximately $2 million below internal estimates.
- The renovation disruption at Hyatt Regency Scottsdale continues to be a substantial headwind, impacting year-over-year comparisons negatively.
- Same-property hotel EBITDA decreased by 7.5% compared to 2023 levels, with a margin decline of 238 basis points.
- Leisure demand softened during the quarter, impacting overall portfolio performance.
- The company has slightly reduced its estimates for adjusted EBITDAre for 2024 due to recent operating results and greater uncertainty regarding market performance in the second half of the year.
Q & A Highlights
Q: What are you seeing with loyalty redemptions, and is there any change affecting RevPAR and margins?
A: Barry Bloom, President and COO, noted that there are relatively few hotels with significant redemption activity. Redemptions are lower this year compared to prior years, possibly due to guests having used up points. Hotels continue to drive occupancy to ensure premium redemption rates.
Q: Can you elaborate on the better business transient outlook for the second half of the year in markets like SFO and Houston?
A: Barry Bloom explained that growth is seen in small and medium-sized businesses, with larger corporate accounts like Fortune 100 companies and consulting firms showing increased activity. The pickup is primarily demand-driven, allowing hotels to compress rates for non-corporate accounts.
Q: How is the leisure segment performing, and does it impact strategies or dispositions?
A: Marcel Verbaas, CEO, stated that while there is some softening in leisure demand, the portfolio's balance across demand segments helps offset this. Scottsdale's renovation focuses on group business, and the market's consistent high-end leisure demand remains strong. No significant concerns about leisure softening impacting the portfolio.
Q: What are you seeing in terms of out-of-room spend, and are there impacts beyond leisure?
A: Barry Bloom highlighted that out-of-room spend, including dining and ancillary services, remains strong, with in-house capture better than pre-COVID levels. Group business mix shifts, with associations stronger than corporate groups, impact banquet spend.
Q: How are expenses trending, and what is the outlook for expense growth?
A: Barry Bloom noted that expenses are expected to moderate for the remainder of the year. Occupancy-driven costs are a factor, with increased sales and marketing efforts to drive occupancy. The strategy focuses on filling hotels to support operations and grow bottom-line dollars, even at the expense of margins.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
