Xenia Hotels & Resorts(XHR) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q3 2025, the company reported a net loss of $13.7 million, adjusted EBITDAre of $42.2 million, and adjusted FFO per share of $0.23, representing an 8% decrease compared to the same quarter last year [5][12] - Same property REvPAR for Q3 was essentially flat for the 30 hotel portfolio compared to Q3 2024, with a 100 basis points decrease in occupancy offset by a 1.6% increase in ADR [5][6] - For the first nine months of the year, same property REvPAR increased by 3.7%, driven by an 80 basis point higher occupancy and a 2.4% increase in ADR compared to the same period in 2024 [7][8] Business Line Data and Key Metrics Changes - Group business was the strongest segment this year, although it was not as significant a driver in Q3 as in the first half of the year [6][12] - Excluding Houston assets, same property REvPAR increased by 2.9%, largely due to significant growth at Grand Hyatt Scottsdale Resort & Spa at Gainey Ranch [6][8] - Q3 same property hotel EBITDA was $47 million, 0.7% above 2024 levels, while hotel EBITDA margin decreased by 60 basis points [8][19] Market Data and Key Metrics Changes - The Houston market negatively impacted portfolio performance due to tough comparisons from Hurricane Beryl's aftermath in Q3 last year [5][6] - The company experienced double-digit percentage REvPAR growth in markets such as Atlanta, Santa Clara, Birmingham, and Savannah [6][8] - For Q4, the same property portfolio REvPAR was $164.50, flat to Q3 in 2024, with total REvPAR increasing by 3.7% compared to the same period in 2024 [15][19] Company Strategy and Development Direction - The company plans to spend approximately $90 million on property improvements in 2025, reflecting a $10 million increase from prior guidance due to additional capital projects [9][10] - A significant relaunch of food and beverage venues at W Nashville is expected to drive incremental revenues, with an additional capital investment of approximately $9 million [10][11] - The company remains optimistic about the long-term growth prospects of its diversified and high-quality portfolio, particularly with strong group demand anticipated for 2026 [12][14] Management's Comments on Operating Environment and Future Outlook - Management noted a challenging operating environment, particularly regarding leisure demand, but expressed optimism due to strong group demand and high-end portfolio positioning [4][12] - The company expects a same property REvPAR increase of 4% for the full year and adjusted EBITDAre of $254 million at the midpoint of updated guidance [12][31] - Management highlighted a projected 5.8% REvPAR growth for October, indicating a positive outlook for Q4 [12][13] Other Important Information - The company has approximately $1.4 billion of outstanding debt, with a leverage ratio of about five times trailing 12-month net debt to EBITDA [26] - The board authorized a Q3 dividend of $0.14 per share, reflecting a yield of over 4.5% on the current share price [27][28] - The company repurchased $12.3 million of common stock during the quarter, with a total of $83.8 million repurchased year-to-date [29] Q&A Session Summary Question: Dividend payout relative to taxable income - Management indicated that they continue to utilize NOLs generated post-COVID while balancing payout levels [38] Question: Group outlook and booking trends - Management noted strong volume growth with better rate growth than in previous years, with a shift from corporate to association business [39][40] Question: Impact of government shutdown on portfolio - Management reported limited impact from the government shutdown, with only a few cancellations noted [42] Question: Transaction markets and disposition plans - Management observed increased hotel transactions in the market but indicated a preference for share buybacks over acquisitions [43][44] Question: Sources of leisure demand weakness - Management attributed leisure demand weakness to normalization post-COVID and economic uncertainties, but noted stabilization in some markets [56][58] Question: Corporate account growth and market specifics - Management highlighted significant corporate growth in Northern California and Santa Clara, with overall improvement expected [61][62] Question: Future expectations for leisure demand - Management expressed that leisure demand could stabilize and potentially improve pricing power in 2026 [64]