Good day, ladies and gentlemen, and welcome to the Host Hotels & Resorts Inc. Second Quarter 2011 Earnings Conference Call. Just a reminder that today's program is being recorded. At this time, I would like to turn the call over to Mr. Greg Larson, Executive Vice President. Please go ahead, sir.

Well, thank you. Welcome to the Host Hotels & Resorts Second Quarter Earnings Call. Before we begin, I'd like to remind everyone that many of the comments made today are considered to be forward-looking statements under federal securities laws. These statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed, and we are not obligated to publicly update or revise these forward-looking statements. Additionally, on today's call, we will discuss certain non-GAAP financial information, such as FFO, adjusted EBITDA and comparable hotel results. You can find this information in today’s earnings press release, in our 8-K filed with the SEC and on our website at hosthotels.com. This morning, Ed Walter, our President and Chief Executive Officer, will provide a brief overview of our second quarter results and then will describe the current operating environment, as well as the company's outlook for the remainder of 2011. Larry Harvey, our Chief Financial Officer, will then provide greater detail on our second quarter results, including regional and market performance. Following their remarks, we will be available to respond to your questions. And now, here's Ed.

Well, thanks, Greg. Good morning, everyone. We are pleased to report another strong quarter of operating results, which were driven by improvements in transient demand and substantial average rate growth. We have also been successful in placing 2 great hotels located in very desirable markets under contract, one in our consolidated portfolio and one in our European joint venture fund. First, let's talk about our second quarter results. Our comparable hotel RevPAR for the second quarter increased 6.7%, driven by an improvement in our average rate of 5%, combined with an occupancy increase of 1.1 percentage points. Our average rate was $184, and our average occupancy was 75.2%. As we discussed last quarter, we expected our operating results to be significantly impacted by substantial renovations at our Sheraton New York and Philadelphia Marriott hotels in the second quarter. Excluding results from these hotels, our RevPAR increase for the quarter would have been 7.6%. In addition, it is worth noting that our comparable hotel results do not include the performance of the $1.7 billion of acquisitions we have completed over the last 12 months, which are performing exceptionally well and have generated an average RevPAR increase of over 18% for the quarter. Comparable hotel F&B revenue growth of 4.4% contributed to overall revenue growth of 5.6%. This increase, when combined with our comparable hotel adjusted operating profit margin increase of 115 basis points and our acquisition activity, resulted in a 25% increase in adjusted EBITDA to $313 million for the second quarter and a 30% increase in FFO per diluted share of $0.30. FFO for this quarter was negatively impacted by a $0.01 per share for acquisition and debt repayment costs, as well as a noncash impairment charge. On a year-to-date basis, comparable hotel RevPAR increased 6.1% driven primarily by rate…

Thank you, Ed. Let me start by giving you some detail on our comparable hotel RevPAR results. Consistent with the first quarter, our top-performing market for the second quarter was San Francisco, with a RevPAR increase of 17%. Strong transient demand contributed to an occupancy increase of nearly 6 percentage points, which led to an improvement of 8.5% in ADR. The ADR growth was driven by both Corporate and Special Corporate rate increases. We expect RevPAR for our San Francisco hotels to continue to outperform our portfolio in the third quarter, due to excellent group and transient demand and further ADR increases. As expected, our hotels in Hawaii continued to perform exceptionally well, with a RevPAR increase of 16.5%. ADR increased nearly 15% due to a shift in the mix of business to higher-rated transient and group business. We expect Hawaii to slightly underperform the portfolio in the third quarter, due to some disruption from renovation activity. Our Tampa hotels also had an excellent quarter, as RevPAR increased 15.7%, driven by more than an 8% improvement in ADR and a 5-percentage-point improvement in occupancy. Transient demand was exceptional. We expect our Tampa hotels to perform very well in the third quarter due to strong group bookings. Our Miami and Fort Lauderdale hotels had a great quarter, with RevPAR up 14.9%. ADR improved 5.6%, and occupancy increased nearly 7 percentage points as transient demand was very strong, allowing the hotels to increase ADR. We expect our Miami and Fort Lauderdale hotels to have a great third quarter and to outperform the portfolio because of strong group demand, which should drive a significant increase in ADR. The Phoenix market continues to recover. RevPAR increased 11.3% as ADR improved nearly 10%, and occupancy increased 1 percentage point. The improvement in ADR was driven…

[Operator Instructions] Our first question will come from Ryan Meliker, Morgan Stanley.

I just had a quick question. I wanted to -- I was hoping you could talk a little bit about D.C. and, particularly, the acquisition that you made. I know Marriott last week came out saying that they expected D.C. to be somewhat soft over the next, I guess, 6 quarters or so. Obviously, Marriott is a little most exposed to suburbs, and you talked about the CBD being a little bit stronger. But can you just give us some indications as to how you're feeling about the CBD versus suburbs going forward and kind of how you got to your valuation, which seemed a little high at about $500,000 a key?

Sure. Let's start with the market first. I mean, there's no doubt that the downtown area has outperformed the suburbs this year. I think as you -- I think Larry had made a comment in his comments that our RevPAR growth in the city was about twice the level that we had for the market overall. As we look at D.C. this year, it is obviously clear that D.C. is underperforming a bit. I think that there's a variety of reasons for that. I think, one, fundamentally, is that the D.C. market did not fall as much as a number of other markets, so there is less of a rebound effect there. I think that this year we've seen -- we have seen and felt the pain from all of the disarray in the federal government around both the budget issues that related to this year's budget, as well as the current concerns relating to extending the debt amount, that -- the debt ceiling, as well as what that may mean going forward. And the consequence of that uncertainty has been that government, which represents, call it, 15% to 20% of our business in the Washington area, government has not booked rooms, especially group rooms, at the level that they had in the past. And so as a result, we've seen a little bit of a group decline in Washington, and in most other markets, we've seen a little bit of a group increase. So I think that accounts for a large amount of the decline. But I think there is a weakness rather. And I think the other point to pick up, which some of you have already commented on is that this is as I already described, it's a little bit higher-government market than what we normally experience.…

Great. And are both hotels operated by Hyatt?

Yes, they are.

And next we'll take a question from Ian Weissman, ISI.

Yes. Maybe you could talk a little about potential dislocation of demand, if you're seeing any, in Europe with talks of sovereign debt crisis in Italy and potential double dip in Europe.

It's interesting is that, as Larry commented in his comments, that our RevPAR in Europe was up 10%, and I think it's 10% for the quarter and about 10% for the year. So that's actually been stronger performance in Europe than what we have seen in the United States. So despite the fact that those talks -- those issues have been out there for quite some time, the performance in Europe, both in the southern markets, Spain and Italy, which are some of the countries that get talked about, as well as the northern markets, has been quite strong. I would say, in general, that one of the reasons why we're seeing that is that in the northern European countries, I think the results are driven a little bit more by stronger economic growth. In the southern European countries, despite the economic concerns that those countries have and the fact that they are caught up in some of the same issues that Greece is facing, although not yet quite to the same degree, those markets, the lodging industry, is also driven by, to a great degree, by tourism. And as a result, we've seen a big increase in tour groups throughout Europe this year. I think that a better economy in the rest of the world has ultimately contributed to better results in Europe. So I think we may see that trend moderate a little bit for the second half of the year, only as we start to move out of the tourist seasons. But the bottom line is that, so far, we got our fingers crossed on this, Europe seems to be holding up relatively well.

And finally, one last question. You obviously are in the market for acquisitions. REITs have accounted for 60-plus percent of the deal so far this year. As you're underwriting new deals today and especially obviously looking at the D.C. acquisition, are you seeing more private capital competing for deals, or is it still a REIT market?

I would say it's a little spotty. I think there are some transactions that where -- that we have looked at where our sense is that private capital has become a more aggressive player. Generally, I think it has been the REITs, and so -- or as you were commenting. They've been the majority of the transactions this year. As the debt markets improve, we would expect to see private capital become an increasingly competitive player in the acquisition world.

Our next question will come from Felicia Hendrix, Barclays Capital.

Ed, in your prepared remarks, you mentioned that you have seen an increased booking curve. I was just wondering if you could quantify that a little bit, and what is it typically in a normalized environment?

It's so hard right now, Felicia, to kind of -- to put like days around how far advanced bookings happen, but I think what -- maybe I'd describe it maybe a little bit more of a qualitative way, which is, last year, what we were finding is that we were typically running behind the prior year's pace until about 90 days out, and then our bookings in that last 90 days before our quarter was going to begin were incredibly robust. And that usually what was driving that subsequent quarter to turn out to be better than the prior year. This year, what we have found is that we are -- that we're coming into every quarter ahead of where we have been. But the bookings in that quarter, while they're still well ahead of what we would have had in '06 and '07 and a magnitude of 40% to 50% better than what we would have had in those prior years, well, they not quite as robust as last year. But the bookings, looking further out, say, looking 2 quarters out, 3 and 4 quarters out, have been stronger. And so I think while you'll still get -- if you talk to an individual GM, they will all tell you that it's still a short booking cycle. And they're right because they're all booking more than the normal amount of business in a relatively near-term time period to when the event happened. The reality is that as you look at the data, more and more rooms are being booked 6 months, 9 months, 12 months out as we start slowly to work our way to back to a more normal booking cycle.

And then is that part of the reason why your guidance is what it is now? Because the second half definitely implies some improvement, and you also touched on that a bit in terms of your view of the economy. But is that part of it, or are there other things, too, that give you confidence in your second half guidance?

I think there's a couple of things that gives us kind of confidence in our second half guidance. The first is if you leave out the renovation impacts on the 2 hotels that we've been commenting on, the Sheraton New York and Philadelphia Marriott, and you look at our performance in the first half of the year, we were running at a RevPAR rate in the first half that was over 7%. So as we think about the second half of the year and we recognize that our renovation disruption should go down a bit, we think it's -- just as -- just to run at the same level as the first half would suggest that the second half of the year is going to run over 7%. I think as we also feel that as we look at the group booking pace as it carries into the second half of the year, it does seem to be a little bit stronger. The rate does seem to be growing. So that gives us a fair amount of confidence that things should be a little bit better. The trickiest part of this whole process is to try to assess the economy. If you look at the blue-chip consensus and use that as, at least, a measure of how folks are looking at the economy, they're essentially calling for better than 3% GDP growth in the second half of the year compared to about 2% in the first half of the year. So if that's true, that should clearly help us in general because, of course, our industry is dependent on economic growth. As we look at business investment, while that -- while the outlook for business investment is a bit more conservative than where it was at the beginning of the year, it is still quite robust. That, in our mind, has been one of the factors behind a strong transient demand and rate growth that we've seen. Now we don't see any reason why that's going to slow a little bit. So I think at the end of the day, you put all those factors together and especially as you look at the fourth quarter, which is where our forecast are showing the most strength, we generally think that we're going to be in much better shape in the second half of the year than in the first.

That's really helpful. And just finally, when -- over the past year, you've had some pretty robust acquisition activity. And obviously, a lot of those hotels aren't in your comp set yet for RevPAR. But as they anniversary and they come in, in the third and fourth quarter, I was just wondering if you could take a stab at how that might affect your RevPAR outlook?

Just to clarify, we have a very conservative approach to what constitutes a comparable hotel, so the reality is that those hotels won't come into our comp set until we've actually owned them for a full calendar year. So they then -- unfortunately, because of how well they've been performing, those hotels want -- won't be coming in, in the third and fourth quarters, despite the fact that we will have owned them for 12 months. I can tell you though that in a rough justice sort of way, if those hotels were in our comp set right now, we would -- our RevPAR results would be about 1 point higher.

And Joe Greff of JPMorgan has the next question. Joseph Greff - JP Morgan Chase & Co: Ed, earlier you had mentioned that 2012 group pace is in excess of what it was a year ago for 2011. Can you comment on the pricing on the 2000 and -- group business on the books? How much higher is the ADR relative to what you're experiencing in 2011 group?

What I would tell you right now is that the -- we're probably up 6% to 7%, in terms of group bookings for '12. The bulk of that increase is in occupancy, not in rate. Rate is up. But one of the trends that we've been seeing for most of this year that the -- we're seeing more rate improvement as we get closer to the actual quarter in which, at least -- which suggests what's happening is as we get closer to the bookings that we're doing in the real short term are apparently coming in at better rates than some of the longer-term business that we had booked. And if you think about some of the business that's happening in '12, a lot of that would have been booked during some of those weaker time periods in 2009. So it's probably not surprising to see that rates are improving. Joseph Greff - JP Morgan Chase & Co: Okay, great. And I know it's probably early in the game for this, but maybe directionally, you can help us understand how you're thinking about ROI capital investment in 2012. And with regard to the Washington, D.C. Grand Hyatt asset, does that property need any capital investment?

I would -- we're about to go through, we probably start in about 2 weeks, the -- our capital planning process for 2012. So I will be in a much better position to answer that question for next year. I think you should assume -- though in general, both of our ROI CapEx will be meaningful next year, just because some of the projects that we started this year carry into 2012. The Grand Hyatt is in pretty good physical condition. There was a fair amount of work that was done there a couple of years ago. So I think, all in all, as we look out over the next 3 years, we're looking at spending somewhere between $10 million and $12 million. So there's nothing material that's associated with that acquisition that we feel we need to do. One of the -- one of our opportunities, which is the one place where this could probably could get more expensive is that we would -- do want to carefully think through the food and beverage platform at that hotel. And some of the changes that are happening in the immediate neighborhood offer us some opportunities to, perhaps, generate higher profit in -- to put in restaurants or other activities that might be better profit generating to what we have today. But some of that, we got to get into the property and assess how quickly things are going to happen in the neighborhood to determine how quickly to move on those items.

Next up, we'll hear from Smedes Rose, KBW Financial. Smedes Rose - Keefe, Bruyette, & Woods, Inc.: I guess I wanted to ask you a little bit. You've mentioned you don't have a lot of dispositions in the works for this year. But as you look at some of your noncore assets, what is demand like in those secondary and even tertiary markets? We know it's obviously very strong in the tier 1 markets, but what's -- are there a lot of buyers in those secondary markets here, or is it improving quarter-to-quarter?

Smedes, I would say there's still not a lot of evidence of transactions happening in those markets. But I think overall, our sense is that things are slowly but surely picking up. A lot of this starts on the financing side, and I think the indications that we've been getting is that the lenders who initially were only focused on the top 5 or 8 markets have now realized that -- gotten more comfortable with the overall level of a recovery and they're starting to expand out into other markets, which is then creating a basis for transactions in secondary markets to happen. So as we look forward, we will most likely be marketing at least a few properties in the fall. And as we think about '12 and '13, we're hoping that we're going to be able to accelerate our sales pace. That will involve a number of deals in secondary markets, and we're anticipating that the levels of demand in those markets will have improved. Smedes Rose - Keefe, Bruyette, & Woods, Inc.: Okay. And then you've -- you -- sorry, I wanted to ask you about your CapEx thoughts for next year, which you kind of answered. But I mean, are there -- I mean, do you see any kind of, this kind of top-to-bottom renovation programs that will start taking place next year or is it really more just finishing up the ones that are underway, which I guess are like San Diego and Philly and New York or...

At this point, I don't think we've identified any other hotel besides really the 5 or 6 that we have that are going through this. I'd add Chicago O'Hare, Atlanta Perimeter, Sheraton Indianapolis to that mix, in addition to the one in New York and the San Diego property. But I -- it's -- there's -- I won't rule out that something like that might not be logical. At this point, we don't have anything that we've identified specifically.

Next, we'll go to Jim Sullivan, Cowen and Company.

Ed, just kind of a follow-up question, I guess, on -- in terms of your prepared comments on New York. You attributed the very weak occupancy there to the combination of new supply, as well as the renovation activity. And I know this is a difficult thing to do, but can you -- if you think about each of those separately, how much of the 500 to 600 basis point occupancy decline would you attribute to the supply variable?

Jim, I don't -- I think it's tricky to try to carve that up a little bit between the 2 -- between the different factors. Supply in New York is up 4% to 5% this year, if I remember correctly. So I -- certainly, that has be to be causing a point or 2 of disruptions. I don't know that it would be more than that. I think some of that depends a little bit also -- I think that effect was probably a little heavier at the beginning of the year than it was in the second and third quarter, as occupancies start to pick up and are naturally stronger in the city and carry into the fourth quarter, where a lot of our hotels are full all year long. I think the effect of the supply becomes less important. In the first quarter, where occupancies are traditionally the lowest in New York, I think the supply increase was a bit more impactful.

And so as you think about the outlook for RevPAR growth beyond the second half of this year looking out to 2012 and 2013, do you look at that supply that you cited, the 4% to 5% growth, in room count in the market as something that'll have minimal impact on the RevPAR growth outlook for that 2-year period?

I would think as you start to get into '12 and '13, it is definitely less of a problem.

Okay. Can you also update us on the spend and the timing at the Helmsley in New York?

Yes, the overall dollar amount that we're projected to spend, net of contributions from our operators, in the $65 million to $70 million range. Our plan at this point is to start construction in the fall of this year, and then we would hope to be done sometime in the second quarter of 2012.

Okay. Then a final question in terms of asset valuation, EBITDA multiples, whichever metric you like to use. When you think about acquisition opportunities in New York versus acquisition opportunities in D.C., how would you compare or contrast the warranted multiples that you'd be willing to pay?

That'll, I would say generally, I would expect to be -- still be a little bit higher on the multiple in New York than the multiple in D.C. If you're talking about properties of a -- sort of similar properties and similar locations that don't have a particular story about them. And I think that really would just be a driver of the fact that as you would look out to '12 and '13, we would be expecting to see somewhat stronger RevPAR growth and profitability growth in New York, in part, because New York fell so much more than D.C.

Next up, we'll take a question from Shaun Kelley, Bank of America Merrill Lynch.

I'd say that most of my questions have been answered, but I did want to go back to the group business point for just a quick second. So I guess the question I have is group revenues were up 4.5% in this quarter, if I caught it correctly. Could you just remind us of where group pace was coming into the quarter, and then how that -- just so we can kind of get a sense of how the group pace numbers you gave again for 3Q and 4Q should kind of play out?

Shaun, I don't have that right in front of me. But my recollection is that the revenue number came in relatively close to where -- if the revenues were ahead at the beginning of the quarter. I think what we've found is that we ended up with a little bit fewer room nights than what we saw. I think we were positive on the room night side coming into the quarter, and we booked less in the quarter for the quarter than we had the prior year. So that declined a bit. But the good news is that as the business all shifted around, the overall rate improvement that we experienced in the second quarter was better than we had forecasted. So we ended up with -- in roughly 4.5% revenue improvement that we had. I should note, too, is I don't want to overdo the commentary regarding Sheraton in New York and Philadelphia. But as I have found in trying to understand how we're doing is that sometimes pulling those assets out, just because of the level of disruption there, gives me better insight as to how the company is doing. If you look at the group side and you take those 2 assets out, what you find is the group demand was up over a point. Leaving out those 2 assets, then the overall revenue growth was higher than what I described, in part, because both of those hotels are big group hotels, especially Philadelphia. And they just weren't able to do the level of group business that they normally would have done. So as you think about the -- your question, which I think is a really good one to think about it for the third and fourth quarter, what I would probably be expecting is that we might find that, in the third quarter, our group room nights is a little less than the 3% we're running ahead right now, although we have healthy rates -- rate growth in the third quarter. So I think bottom line is that the overall results for the third quarter for group should be fairly positive. The fourth quarter I would still expect to see continuing a trend that we've seen all year. I would like to expect that we will find that there'll be more rooms booked going into the fourth quarter when we're talking to you in October than what we have right now, because the pace sort of that quarter out or so has still been pretty good. So I would expect to see some additional strength in the fourth quarter.

That's really helpful, Ed. And then I guess the only other thing was just as you think about the renovation that obviously you guys are doing these in anticipation of probably getting some kind of additional or incremental performance. But just getting those hotels back in kind of into the overall mix should boost your RevPAR, at least, in the New York and Philadelphia area. So I guess what I'm wondering is have you -- kind of implicit in your forecast, is there additional improvement coming out of those hotels because of the renovations? Or is it simply that they go back to market averages, and that if there was additional upside based on what you spend that, that wouldn't really be contemplated in what you're guiding to today?

You know what? As it relates to Sheraton in New York, we're sort of -- we're only about halfway through the process there. So we are looking at -- we expect to see good RevPAR growth from that hotel for the rest of the year. Some of that is New York. Some of that is the fact that the new rooms that we've done at that hotel is spectacular, especially compared to the rooms that we've had before. So there I think we are probably getting some of the lift out of the work we're doing. In the case of Philadelphia, one point I want to clarify is that we finished the main tower, the main building, which is the bulk of the hotel rooms there. But we still have the expansion that we did in that hotel about a decade ago called The Headhouse. We still have the rooms to do there. So Philadelphia will not be completely done until the fourth quarter. I think the combination of the new rooms and the new meeting space is clearly going to make that hotel that much more attractive, and so we'll see some good lift. It's unfortunate, in some ways, that the timing of this renovation -- we've been doing the Philadelphia renovation to be ready for the expansion of the Convention Center, and a tremendous amount of group business is going to hit next year. This year has also turned out to be a very solid year in Philadelphia. And I think Larry had told me that if you pulled Philadelphia, our Philadelphia hotel out of our Philadelphia result, our Philadelphia RevPAR would be up 9% in this past quarter. So it gives you a sense of the pain we're feeling to have the construction going on at this point in time. But at the end of the day, it was better to be ready for next year than it was to delay the renovation and then hurt yourself from what we think will be a very strong group year, especially when we have the best situated group hotel in the market for convention business.

And next we'll hear from David Loeb, Baird. David Loeb - Robert W. Baird & Co. Incorporated: I wonder if you could just give us a little more color on the Hyatt acquisition. Can you give us any information on what you think the multiple was that you paid for? What you think the first year yield is? And how do you expect to fund that acquisition?

David, I would tell you that the multiple was just under 14% based on 2011. So it's in the same range of the other acquisitions of this caliber of a more stabilized asset that we've made. In terms of -- I think in terms of next year, we had -- I don't think I want to get into disclosing our -- what our expected yields are for next year. I -- you should take some insight from my comments that we're not necessarily expecting tremendous growth in Washington in 2012 into account.

David, we're going to fund it through -- we have $630 million -- a little over $630 million of cash on the balance sheet. So as you know, we did the bond deal in the quarter. So we've raised some capital there, and we also -- our intent is to assume a mortgage on that hotel as part of the acquisition. So that's where the financing for the acquisition will come from. David Loeb - Robert W. Baird & Co. Incorporated: So you do expect to keep that mortgage? It was sort of vague in the release.

Yes, well, I think it was vague for a reason. We're -- our goal would be to keep it, but we are in discussions with the lender, and that is not fully determined at this point in time. So I think it would be handy to be able to take advantage of the existing mortgage, but on the other hand, it's not, as Larry detailed in his commentary, about some [ph] of our cash position, if it -- if that we ultimately cannot assume it, then we will close all cash and be happy with that result, too. David Loeb - Robert W. Baird & Co. Incorporated: And you have the cash pretty clearly, but you don't have a ton of cash left. What's -- nor availability in the line of credit. What's your expectation for how you might fund future acquisitions? Would that be from additional debt, secured debt and other unsecured offering or further ATM...

Yes, let me clarify one point. I mean, we have, I think Larry said, over $475 million of availability on the line of credit. So we do have pretty good liquidity on the line of credit. I think going forward, we would generally be expecting to fund transaction through a mix of equity, most likely on the ATM Program and then debt. And as we're starting to get to a point where I think we may start -- we're starting to generate some cash flow from operations, too, which would also contribute to the mix. And then the last thing to take into account, I mean, just -- we haven't made an incredible amount of progress on this front yet, but we are going to be selling more assets. So as you start to look out into '12 and '13, I think we will be -- we're looking less at external sources of cash and more and effectively internally generated, either from ops or from sales, is the way to fund acquisitions. David Loeb - Robert W. Baird & Co. Incorporated: And I wasn't trying to be critical, because it certainly is an impressive array of acquisitions that you've made this year. It's just that you're getting down to it, you're not in the same position you were at the beginning of the year, pretty clearly.

No, you're exactly right about that. Larry's getting sweaty just listening to you talk about that. David Loeb - Robert W. Baird & Co. Incorporated: He's thinking about the next $1.7 billion of acquisitions. Great.

And ladies and gentlemen, we have time for one further question today. That'll come from Josh Attie, Citi.

Can you talk about how you expect RevPAR growth to break out between the third and fourth quarters? I think we all probably assume that the fourth quarter is a little better, but maybe you can quantify how much stronger in your internal forecast you expect the RevPAR growth to be.

Josh, I'm going to shy away from giving what would end up being specific guidance on the quarter, because we've just made a policy decision not to do that at this point. But I think you've correctly analyzed it, that we would expect the fourth quarter to be stronger than the third quarter. I think that there's -- probably, I would have 2 basic reasons for that. One is that I think that the current issues that are floating around out there probably have a little bit more effect on Q3 than Q4, and I think the economic outlook for Q4, for most people, seems to be a bit more positive. The other point that I would make on that is that not only do we expect the renovations that we've been doing this year to moderate a bit, at least in terms of the 2 significant projects that we've been identifying, but as you circle back to last year, you may or may not remember that our investment spend, our capital spend in Q4 of last year was considerably larger than what we had done in Qs 1 through 3. And so as we think about overlapping that year with the fourth quarter of 2011, we sort of view it that there was construction disruption last year. That was one of the reasons why our fourth quarter was a little bit weaker than you might have anticipated, given the way the rest of the year had played out. We will get the benefit of that sort of relative weakness as we come into the fourth quarter of this year. So for both of those reasons, we would expect the fourth quarter to be stronger, and I think the big question is going to be how much.

And so -- maybe thinking about the renovation disruption separately. The renovation disruption you said was 1.5 of RevPAR for the first half of the year. Will there be some impact on the -- from the renovations in the third quarter, and then that level of disruption subsides in the fourth quarter? Is that the right way to think about it?

There'll be a little bit in the third quarter for 2 reasons. If you'll have Philadelphia still finishing up its last set of rooms, so that has some drag, and an overall level of capital in the system is a little bit stronger in general. So I think we'll see the third quarter is little bit better than the second quarter, then I'd expect to see the fourth quarter to be meaningfully stronger than that.

And ladies and gentlemen, that does conclude today's question-and-answer session. At this time, I would like to turn the conference back over to our speakers for any additional or closing remarks.

Well, thank you for joining us on the call today. We appreciate the opportunity to discuss our second quarter results and outlook with you. We look forward to providing you with more insights into the -- how this year is playing out when we do our third quarter call in October. Have a great day, and enjoy the rest of the summer. Thanks a lot.

And once again, that does conclude today's conference. Thank you all for your participation, and have a great day.