Xenia Hotels & Resorts: Spending For Long-Term Growth

Core Viewpoint - Xenia Hotels & Resorts is strategically enhancing its portfolio through renovations and acquisitions, positioning itself for growth despite economic uncertainties [1][9][13] Financial Performance - Xenia's F-Score has consistently been 6 and above since 2021, indicating a strong financial position within the upscale hotel sector [2] - The company's leverage is just below 50%, with a fixed interest rate loan portfolio averaging 5.50% [3] - Xenia's EBITDA has more than doubled post-renovation, with significant improvements in RevPAR Index [6][7] Guest Demographics - 70% of Xenia's guests are business and travel groups, providing a diversified revenue stream and reducing reliance on leisure travelers [4] Renovation and Upbranding - Recent renovations at properties like Hyatt Regency Grand Cypress and Park Hyatt Aviara Resort have resulted in over 50% EBITDA gains [5] - Capital renovation spending increased significantly, from $22.4 million in 2023 to $35.8 million in the current quarter [8] Acquisition Strategy - In 2023, Xenia acquired Hyatt Regency Portland for $190 million at a cap rate of approximately 4.84% and W Nashville for $328.7 million at a cap rate of about 4.10% [9][10] Market Performance - Xenia's stock has a beta score of 1.53, indicating higher volatility compared to the overall market, which may present buying opportunities during price dips [11] Long-Term Growth Prospects - Management anticipates long-term EBITDA growth, contingent on the economy not entering a recession [12] - The company has historically paid dividends exceeding earnings, raising concerns about sustainability [12]