Good day, and welcome to the Xenia Hotels & Resorts, Inc. Third Quarter 2017 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Lisa Ramey. Please go ahead.

Thank you, Rachel. Good morning, everyone, and welcome to the third quarter 2017 earnings call and webcast for Xenia Hotels & Resorts. I'm here with Marcel Verbaas, our Chairman and Chief Executive Officer; Barry Bloom, our President and Chief Operating Officer, and Atish Shah, our Chief Financial Officer. Marcel will begin with the discussion of recent activities and an overview of our third quarter results. Barry will follow with a more detailed discussion of operating results in the quarter, and Atish will conclude our remarks with an update on our balance sheet and our guidance for the remainder of the year. 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 10-K and other SEC filings which can 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 earlier this morning, along with the comments on this call, are made only as of today, November 7, 2017, and we undertake no obligation to publicly update any of these forward-looking statements as actual events unfold. You can find a reconciliation of non-GAAP financial measures to net income and definitions of certain items referred to in our remarks in this morning's earnings release. An archive of this call will be available on our website for 90 days. With that, I'll turn it over to Marcel to get started.

Thanks, Lisa, and thank you all for joining our call this morning. The past several months, since our second quarter call have been eventful to say the least. Before I turn to our recent activities and our third quarter results, I would first like to once again thank the management teams and their associates at our hotels that have had to deal with various natural disasters over the past few months. We are proud of each of the teams for their dedication and commitment to our hotels, while dealing with personal hardships and turning to the needs of their families and communities. Several of our hotels were operationally impacted by Hurricanes Harvey and Irma in the third quarter and to a much lesser extent, Hurricane Nate early in the fourth quarter. Additionally, operations at our two hotels at Napa were impacted by the recent wildfires that caused significant destruction in the Sonoma and Napa Valleys. As we reported in this morning's earnings release, our hotels in Houston have rebounded well in the aftermath of Hurricane Harvey and our Key West property is open and fully operational following Hurricane Irma. As it relates to the Northern California wildfires that occurred in October, both of our Napa hotels are currently open and fully operational. While neither sustained direct fire damage, we are continuing to evaluate the extent of damage, including smoke and other consequential property damage as well as business lost during and in the aftermath of the fires. We have estimated the operational impact of the hurricanes and the wildfires. Updated guidance for the year to the best of our abilities. Atish will discuss in further detail later in the call. We are also continuing to evaluate our ability to recover amounts for business lost as a result of these natural…

Thank you, Marcel. Let me begin with the review of the Hurricane impact across our portfolio for the quarter. During Hurricane Irma in addition to our hotel in Key West, our hotels Savannah, and Charleston South Carolina also closed briefly due to mandatory evacuation orders. In total, 16 of our hotels experience some level of business impact from Hurricanes Harvey and Irma, with our Houston, Dallas, Orlando and Orleans hotels are achieving higher than RevPAR for the quarter, and our hotels in Key West, Austin, Atlanta, Birmingham, Savannah, and Charleston South Carolina, experiencing lower than expected RevPAR for the quarter. As Marcel noted, we are grateful for the dedicated employees of our properties as well as within our company who worked tirelessly and spend significant time away from their families as they prepared for weathered and recovered from these natural disasters. As Marcel mentioned, our portfolio performance exceeded our expectations despite the calendar shift of the Jewish holidays into September and softer group business in the quarter. As a short term negative impact from Hurricanes Harvey and Irma, was offset by increased post-Hurricane demand in Houston and stronger than expected performance in several markets. Same property RevPAR declined 1.3% comprised decline in average daily rate of 2.2% which is offset by occupancy which increased by 68 basis points. Group business was down approximately 1.6% for the quarter compared to last year, while transitioning contract business to reached approximately 1.2%. Our top performing RevPAR markets during the quarter were Salt Lake City, up 14.5%, Houston of 8.6%, the Orleans of 6.8%, San Diego up 5.7%, Santa Clara at 5.6% and San Francisco up 5.5%. Hotel Monaco Salt Lake City successfully implemented an aggressive transient strategy despite weak group production in the quarter. Our Houston hotels were impacted in late August by…

Thank you, Barry. I would like to discuss two items this morning, first our balance sheet and second, our outlook for the remainder of the year and initial thoughts on next year. As to our balance sheet, we continue to be focused on having a strong balance sheet that allows us to execute on our growth strategy overtime. We recognized that the strong balance sheet is necessary to be opportunistic as evidenced by our ability to close on three acquisitions in October. Over the months ahead, we will focus on continuing to strengthen the balance sheet. Specifically, we intend to lower our leverage from its current level of approximately 4.2 times debt-to-EBITDA, which is pro forma for our October acquisitions. Our goal is to have a sub four times debt-to-EBITDA ratio by next year. Over the last several months, we've taken advantage of strong credit markets to pin to new allowance, we closed on a $100 million variable rate mortgage secured by the Renaissance Atlanta Waverly Hotel in August, recall that our basis in this hotel is approximately $110 million, so, we have effectively financed out our equity in the hotel. The loan matures in 2024, and bares a low interest rate of LIBOR plus 210 basis points. Second, we closed on a new $125 million, seven-year unsecured term loan. Subsequent to quarter end, we fixed the rate on this term loan through September 2022. The effective interest rate on the loan based on our current leverage is approximately 3.8%. Our current mix of debt is about 75% fixed and 25% floating. Our maturities continue to be quite manageable but no maturities schedule than 2018. In 2019, approximately $300 million of our debt matures but each of the maturity has an extension option. In addition, our fixed coverage ratio, pro…

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Jeff Donnelly with Wells Fargo. Please go ahead.

Good morning. Actually, I guess maybe Marcel I'll just want to kick off a question for you is just is been move the past few years divide the CEO and Chairman roles I was just curious what kind of drove the decision to name U.S. Chairman versus maybe another individual on the Board I guess I was wondering if the catalog maybe just another Board member looking to reduce their role?

No, thanks, Jeff. It certainly wasn't necessarily a Board member looking to reduce their role. The Board felt it was just an appropriate time to elevate need to the Chairman position, but it's in the fact that we have a history as for three years as a public company here. We clearly have yes, I personally have leading this company for the last 10 years, so it is something where the Board felt that it was appropriate for me to now lead the company also as the leader of the Board. So that was a decision that the Board made and obviously in conjunction with that we made we need to switch to elevate therein and promote therein sort of present a position which we shall view as very well deserved and as you know our company it's something we're particularly proud of our overall leadership team here including Barry, Atish and the rest of our executive team here, so I think it's a good move for the company overall and that's all that drove that.

Understood. No, I was just curious that there is something more to it. Maybe just to switch gears I actually had a set of questions for Barry and concerning Key West and Napa, you touched this in your remarks, but both of those markets are going to coping with I guess called a rebuilding process. What's your take on that? I guess specifically how they ramp back, do you think Key West, I guess snowfall [ph] season is favorable at this point, I mean do you think the headlines are maybe damaging their ability to recover in winter and what are they doing and I guess in the similar way about Napa maybe talk about whether you kind of see their peak season and it's being talked about certainly with sort of the level of damage that we heard about from the Caribbean, but I guess now that some of the fires have passed, so I guess I'm just wondering it was extensively discussed and how does it kind of affect leader demand in your view?

Yup, great question obviously, certainly the new cycle has not been our friend in the hospitality and particularly it relates to our particular assets the more damage extensive damage is shown whether it's add or adjacent to our properties excluded the challenging and reality is that we had very little damage on a relative basis in Key West and other than smoke damage really no damage in our properties in Napa. To the point of the question though, we have continued to be impressed with how rapidly each of those market is recovering. Starting from a stand still obviously you asked we had par revenue levels grew literally every day to October, we had a very successful second week in the fantasy fest in fact we beat last year's results over that weekend. And continue to see improved performance in November. You'll recall that when the storm first happened in Key West, the CBB there actually kind of discouraged people from coming back in October at all, so we're hopeful and based on our transit bookings we're certainly seeing things recover more quickly. Key West is definitely open for business. The Wall Street is the same as it always has been, and we think that perhaps even in the very near-term we're getting some benefit by having all of our rooms opened while there is still some property out of inventory. Napa is a little bit different. The reality is that the fires didn't make it really anywhere close to our two hotels, The Marriott or The Andaz but certainly there's a perception that again based on the new reports and television in particular that whole area is of the Napa Valley were completely burned out. The large-large majority of the wineries are open and operating. The town of Napa is working on some aggressive campaign and bring people back and again we're seeing transient leisure business improve week-over-week. What I think is also important to note is that with that leisure demand clearly people are looking for activities to do and the activity they wanted to do over there. Our biggest impact we think in Napa is behind the certainly September and October are our strongest months there, so we'd already had and kind of accounted for what we think are the weakest parts, the November-December-January timeframe there seasonally, is actually our weakest kind of three consecutive months there. So, we are hopeful we make it through that, and then we come out of Napa with a very robust spring moving forward.

That's useful. And maybe just one last question on Houston obviously there has been a lot of discussion around the possibility of an extended benefit that's accrues from the damage from Harvey down in Houston. When you kind of think about that for the market, I guess how much of that really relates to whether its elimination of supply, call it temporary elimination of supply or sort of temporary demand whether it's some displaced homeowners or emergency utility crews. I am just trying to think about how long that sort of benefit could last in that market, now I guess that related to that, either of your Westin see any kind of pickup from the Astro taken it out.

So yeah, so there has been a lot going on in Houston obviously and we have kept a very careful eye on it. We did get some World Series lift at the Westin Oaks and Galleria are really no World Series lift in the Woodlands. But the market is strong right now and the market has really taken on a lot of different characteristics. Our hotel certainly played differently in the market than a select service property would. Couple of reasons why, one is the price point of our hotels and the type of business we do which is fairly heavily group focused means that we didn't necessarily have the opportunity to take large blocks of displaced gas or recovery type of business and that was intentional in our part. But again, we had significant of group business booked in the hotels that other than the first week or two has been able to come into the market. So, we have been beneficiaries of compressed transient business in the market as the market itself as looked in as this transient business has and there is relocation and recovery business has been there. We probably got a little slower start than some other properties in the market just because we decided along with our management companies there to really kind of clear the desk, see what opportunities were out there and then aggressively go after the ones that we thought made best sense for us. But again, I think our properties are will continue to perform very well in the market, but they will behave somewhat differently than some other properties that are directly receiving relief in the relocation business.

Understood. Thanks, guys.

The next question comes from Thomas Allen with Morgan Stanley. Please go ahead.

Hi, good morning. So how did some earning fall that - they can dispose a billion and a half of assets, you have obviously been acquiring the past are you thinking about that announcement.

Well, Thomas, this is Marcel. Good morning. Well, we are obviously very pleased that we were able to complete the transaction, we did with Hyatt and as you know it was not our first transaction we have done with them. We were able to do with the Hyatt, Cyprus [ph] earlier in the year. A few years ago, we bought to on those properties directly from them and we also bought the Idrees [ph] and Regency Santa Clara in the past directly from Hyatt. So, we clearly have a very strong relationship with them operationally and transactionally. So we will certainly continue to look at for opportunities there and I am sure they will do the right thing for their company as far as how their potentially marketing those assets and to the extent that their appropriate fit for us, we would take a look at those type of things and Atish pointed out that focus for us here in the short-term certainly is focusing on operations and making sure that our balance sheet remains very strong to be able to take advantage of opportunities when they're out there. So, our main focus is making sure that we look to acquire assets at our strategic fit for us in the long-term and we felt very strongly that these transactions we have been able to complete within this year where you fit the box very well for us.

Okay, helpful. Thanks. And then why there are themes earning season has been on line travel agencies results have been worse and expected. Are you seeing any traction for the direct booking push or any interesting trends as it relates to kind of you mix and can that help margins?

Thanks, Thomas. In general, as you know our properties are not heavily rely on OTA business to begin with. Obviously, we have a decent component them but this, we're not in the kinds of market that see tremendous OTA business with the possible exception of Wahoo. But we are seeing some beneficial shift at of OTAs and into direct channels. That sort of a not what I think we thought it would be when the company, when the brands was started building the walls higher, a couple of years ago and certainly we continue to be surprised by the overall volume of OTA business, which obviously continues to grow on an overall basis.

Thank you.

The next question comes from the Bill Crow with Raymond James. Please go ahead.

Hi. Good morning, guys. Just picking up where Jeff left off on the disruption from the storms, can you talk about any labor or employee turnover issues that you are having and either Key West or Houston?

Yes, we have seen very little of that, I mean really none not in Houston, not in Napa, Key West has always been a fairly transient market and there are a small number of line employees that kind of left and haven't come back, but given how early we were able to get our hotel open and fully operational, we've had no issues in terms of identifying and hiring qualified labor.

And we also worked with our management companies during some of these natural disasters to make sure that we put the right kind of plans in place to make sure that we would have the appropriate retention going forward or so. Some of that obviously hits the kind of onetime process or result of that, but what we certainly benefited from that as it related to limiting the turnover at Delta.

Great. I wanted to get your comments Marcel on Kimpton; it came up in an earlier call of this earning season that Kimpton was having some struggles with the integration. I am just wondering what you are seeing at your hotels given that you've got such a high concentration?

Well, I'll kick it over to Barry here. So, I have to talk a little bit more specifically about the operations in some of those assets. He has been very involved with discussions with Kimpton as it relates to integration into IFD. We are actually hopeful that there will be some steps taken here in the short-term that should benefit the properties as there is a little bit more inauguration and there some more integration in the boards programs and those types of things. If you would like to add anything to that I think it will be helpful.

I think Marcel hit the most important points. I think I would not suggest that it necessarily been fully integrated, but certainly it's been on a longer and more extended timeline that we would have liked overall and we think it's really important to get the property management systems upgraded into the IG platform. That will only help with reservations. I think the movement of the Karma [ph] program in Taiichi Awards [ph], we think we will be beneficial in the long-term and again it's something that we think could have happened sooner Karma [ph] as a standalone works program by Kimpton admission was not performing well over the last few years. But we think that if we can move ahead and they can really move ahead and get these pieces put in place in Q4, that we should have a much better setup in terms of how the guest perceives Kimpton, how they understand it's part of the IG system and how we can move forward in terms of having a much more integrated technology platform.

And the only thing I'll add to that is that we wouldn't want to make any real blanket statements about the Kimpton assets in the portfolio frankly, because we've had some assets that have performed well and there have been some assets that are little bit more challenged, which is largely been due to specific market condition in some of those areas as well, but we certainly would help for the integration to play out as Barry just pointed that.

That's helpful. Finally, from me Marcel, both you and Atish, mention your desire to get your balance sheet to get leverage levels down a little bit is that organic, is that asset sales, is that still an option at this point or if you kind of extinguish your non-core assets?

Thanks, Bill, it's Atish. So, I think we said sub four times by mid next year that's quite a way from now and we have also - we are not that much above four times. So, I think through the cash flow, we generate, you can get some of the way there if not all the way there. Obviously, we have other tools available to us and we're pass the bulk of what we wanted to do on the assets sale side, but we're active on the portfolio, we are always looking at opportunities, so that continues to be avenue that is open to us. So, I think those are the two components of how we would get there.

Thanks. That's it from me.

The next question comes from Brian Dobson with Nomura Instinet. Please go ahead.

Hi, good morning. So just quickly touching upon what you just said on the portfolio. Which markets are you most excited to get into over the next two years and which would you consider going back from?

Thanks, Brian. As far as market we've look to get into, I think we've always been very consistent in the way that we talk about that we'd like to be like having some balance among the top 25 U.S. margins markets probably and key leisure destination. So, we think that always gives us a little bit broader range of potential markets to look at as appose to just saying we have four or five target markets we absolutely have to get into. If you look at some of the top 25 markets that we're not in those markets by design, there are reasons why we're not in market so that high supply growth or have significant labor pressures and all those type of things. So, we don't feel like there is any specific blank spot that we absolutely have to go after, but if you look at what we did just over last few months, we had exposure in Orlando, we had exposure in DC, we certainly didn't feel like we were over expose and need one of those markets so that there is an opportunity to look for some good opportunities in those markets. The market like Phoenix, it was markets that we had looked at and said, we don't have any exposure here now. We do have history in the market, we know the market well and this was a very good opportunity for us to enter that market. So, that's the way we'll continue to look at opportunities, we're going to be pretty opportunistic as we look at markets on the acquisition side. And as it relates to the disposition side, it's going to be two or three points, lot of the heavy lifting is done on disposition, but clearly, we want to manage our balance sheet, we want to have flexibility on our balance sheet, we think we are certainly not over extended it as it relates to our dead levels right now. We've got a great balance sheet as we sit here, but we may want to look at some additional dispositions to just create some additional dry powder going forward for opportunities. And the thought processes there will be similar to what we've always had which is look at a market, look at assets, look at what the CapEx needs or potentially in certain assets. Is it a correct there or why to get to make that additional investment or is it potentially time to some out of those. So, I think to pin point specific assets or as you know we don't really comment on those until we agree come to provision. That remains the overall philosophy.

Great, it's helpful. Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to Marcel Verbaas for any closing remarks.

Thank you, Rachael. And thank you everyone for your questions and continued interest in Xenia. And we look forward to seeing many of you at REIT World in Dallas next week.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.