Good day, and welcome to the Xenia Hotels & Resorts, Inc. Fourth Quarter 2017 Earnings Conference Call and Webcast. 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 Ms. Lisa Ramey, Vice President of Finance. Please go ahead ma'am.

Thank you, Keith. Good morning, everyone and welcome to the fourth quarter and full year 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 overview of 2017 achievements and fourth quarter and full year operating results. Barry will follow with additional details on our portfolio results and operational highlights as well as a detailed discussion of our capital expenditure project. And Atish will conclude our remarks with discussion 2018 outlook and recent balance sheet progress. 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 could 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, February 27, 2018, 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. Good morning everyone and thank you all for joining our call. While 2017 brought us challenges particularly with a variety of natural disasters impacting the country in general and our portfolio in particular. We were pleased to finish the fourth quarter and the full year ahead of our expectations. And once again, with a higher quality portfolio than where we started the year. As promised we remained focused on improving the quality of our portfolio through transactions and portfolio enhancements and further strategy of primarily owning luxury and upper upscale hotels in top 25 US markets and key leisure destinations. We continue to believe we're positioned well for the future. As our capital allocation decisions have positioned us to take advantage of both internal and external growth opportunities. Our geographic diversity serves us well in 2017. And while supply is increasing in many markets around the country, the average supply growth in our markets continues to be more favorable than with many of our peers are experiencing. As a result of our transaction activity over the past year, not only has the overall quality of the portfolio improved but so has the long-term growth profile and supply growth picture. Through our completed transactions the estimated weighted average supply growth in our market tracks was reduced to 3% in 2018. A decrease of 50 basis points compared to our prior exposure. We completed over $825 million of transactions in 2017 consisting of four acquisitions totaling approximately $615 million and seven dispositions for a total amount of $212 million. We completed the acquisition of Hyatt Regency Grand Cypress in Orlando in May and the purchase of Hyatt Regency, Scottsdale, Royal Palms Resort & Spa, and The Ritz-Carlton, Pentagon City in October. We were pleased with the pricing and execution of…

Thank you Marcel. As Marcel mentioned our portfolio performance exceeded our expectations aided by the calendar shift of the Jewish holidays, post-hurricane demand in Houston and stronger than expected performance in several markets. As a reminder, our same property portfolio consist of 39 hotels we owned at year end. Note, that this includes our hotels in Key West and Napa despite significant weather related disruption and closures during the quarter and the year. Additionally, we included disclosure on our pro forma 38 hotel portfolio which excludes Aston Waikiki which is in our contract to sell in the first quarter. In order to provide a clear understanding of the seasonality of our portfolio going forward. Same-Property RevPAR increased 4.4% for the quarter due entirely to an increase in occupancy as ADR remained flat. Revenue from Group business was up approximately 12% for the quarter compared to last year while transient and contract business revenue increased approximately 3%. As a result of our recent acquisition in dispositions Group business now accounts for approximately 33% of our business mix. Our best performing markets for the quarter were Houston, with RevPAR up 16%, 28% despite renovation headwinds. New Orleans' up 14.9%, Dallas up 13.9%, San Francisco up 12.1%, and Salt Lake City up 11.8%. 18 of our 25 market showed RevPAR growth for the quarter 12 of which were above 5%. As I mentioned Houston benefited from post-Hurricane demand and our hotels were able to drive rates as - strong Group business during the quarter. New Orleans and Dallas benefit from city wide demand during the quarter and strong in-house Group business as well. Napa and Santa Barbara struggled in the fourth quarter as a result of declines in business related to the respective wild fires each down 13%. Key West continued to challenged…

Thank you Barry. I will cover two topics today. First I'll discuss our 2018 guidance and then I'll turn towards discussion of our balance sheet progress over the last year. I will begin by discussing our adjusted EBITDA and FFO per share guidance. As a result of our transaction activity and recent renovations we anticipate both adjusted EBITDA and FFO per share to grow in 2018. We expect our adjusted EBITDA to be between $281 million and $295 million in 2018. Transaction activity and post renovation lift are the key drivers to our earnings growth. Given how active we've been on the transactional front I want to provide a detailed walk of these relative of the midpoint of our 2018 guidance. The four hotels that we acquired last year are anticipated to contribute approximately $40 million more in EBITDA relative to what they contributed in 2017. This is somewhat offset by disposition activity. The seven hotels that we sold last year contributed approximately $9 million to our 2017 adjusted EBITDA. In addition to this, our guidance reflects the pending sale of the Aston Waikiki Beach Hotel. This hotel contributed approximately $12 million to our 2017 adjusted EBITDA net of $3.4 million of general excise tax expense for our ownership of the hotel from 2014 to 2017. We expect the Aston Waikiki to contribute between $2 million and $3 million to our adjusted EBITDA during our ownership period in 2018. Adding together the completed transactions and the pending sale of the Aston Waikiki the net pro forma EBITDA increase from transactions since the beginning of 2017 is approximately $21 million at the midpoint. The majority of net $21 million is expected to be realized in the first half owing to both the timing of the transaction activity as well as the…

[Operator Instructions] and the first question comes from Thomas Allen with Morgan Stanley.

There is been some debate around the Houston market just around what the outlook is for 2018, how long the displacement business is going to stick around? How are you guys thinking about that? Thank you.

Good morning, Thomas. I'll start it off and will have Barry jump in here shortly. We felt that as we kind softer our last year conditions were starting to strengthen in Houston overall and then obviously after Harvey, there was a lot of incremental demand that was generated and a lot of compression that was happening in the market. We're obviously very focused on our assets very specifically, we think that clearly the comparisons are more difficult this year. We weren't the type of assets that necessarily benefited from the true kind of displays resonant type of demands. We're obviously the type of assets that are living by the transient, by the corporate demand and the group demand that's coming into our hotels. So we think that just kind of the natural course of business is certainly strengthening in Houston. And as it relates to our asset specifically, we expect to be flat to slightly negative this year, just because the comparisons are very difficult going into this year and we're also dealing with some of this renovation impact as it relates to our assets, but we feel very strongly about these renovations that we've now - that we're kind of in the middle of completing at this point and having a product that's going to complete very effectively there going forward. So anything to add there, Barry?

I think as we look at last year, we had very good group on the books for Q4 in Houston so that actually kept us from taking on some longer term kind of refugee or displacement type of business, we did benefit on the transient side from just general compression in the market. But as Marcel said, certainly Q4 this year will be a very tough comp for the market overall and as we look at kind of finishing up our renovation work for the end of Q3, we think we'll have a good year, but given a lot of puts and takes related to Super Bowl not being there in 2017 and not 2018 our own revenue displacement due to the renovation work and then really a tough comp in Q4. I think we're looking for the real market strength to emerge kind of very late 2018 and into early 2019.

Helpful and then Aston Waikiki. I mean there is a lot of bullishness around Hawaii in general, so did you chose to sell that asset? Thanks.

Obviously we're still in the midst of completing the transaction. We - so probably won't comment quite as much as we can after we complete the transaction, but that being said we recognize that the overall Hawaii market has had a lot of interest and it's a market that's overall is a market that's not seeing a lot of supply growth which is obviously positive and our particular situation here, it's an asset that's competitively it has been somewhat challenged because of the condition of it versus its competitors. We felt that actually this asset was particularly now that we've upgraded our portfolio as much as we have over the past few years, is now a perfect strategic fit for us in a longer term. So the ability to actually take advantage of the opportunity to sell an asset during a time where the market is attracting a good amount of investment interest, we thought it was an opportune time for us to transact on it.

Helpful. Thank you.

Thank you. And the next question comes from Jeff Donnelly with Wells Fargo.

In the fourth quarter and I guess full year 2017, you were able to deliver pretty healthy positive margin growth really despite lack of ADR growth. I know you said in your remarks the F&B margins were more robust, expenses were contained. But do you believe those were moment in time efficiencies or do you think those could extend into 2018?

I think on balance Jeff, we think those do extend. I think when you look at what we've accomplished in the last several years. We really spent a lot of time and had very good reception from operators and really figuring out how to maximize the businesses. We've talked about before, we look at every revenue item. We continue to find lots of opportunities in ancillary revenue whether that's roll away beds, early departure fees, those kinds of things are obviously surely incremental profits, we've seen flow from those and we think we'll continue to see flow from those. But then on the expense side not only we gone through really expenses in each one of our properties, but we found a lot of labor savings and a lot of labor efficiencies primarily looking at how the hotels are staffed, how things move to the hotel? How houseman bring things up to the floors to housekeepers? How housekeepers work their days and how they're scheduled? Really matching the labor staffing in a hotel to demand levels on a day-by-day basis. I wish I could make it sound more magical than it is, but it's really just looking at the entire business operation and finding opportunities to really enhance revenues and contain cost.

Are you able to share maybe Atish can chime in, what are you guys building your 2018 guidance for margins or did you kind of stay conservative on that front?

Well as I mentioned in the prepared remarks Jeff. Our guidance implies a margin decline of about 40 basis points and so if you - and that was driven primarily by higher taxes and insurance. So if you were to adjust for the impact of those two items really we're talking about flash margin at the midpoint of 1% RevPAR growth environment. So obviously we've got certain level of built in thoughts on finding opportunities for efficiency and limiting expense growth outside of those non-operating areas Barry mentioned. Barry is there anything you want to add?

Yes, I mean when we look at overall netting all those we're looking at as oppose to 0.7% expense growth we achieved this year, we're looking in that midpoint of guidance of 2.1% expense growth next year.

[Indiscernible] maybe just one last question. I hate to leave Marcel out. I'm not sure you'll venture a guess but if a leasehold interest on the Aston went for 12.6 times, what do you think of fee simple evaluation would have been for that property?

That's - I probably venture guess on that. I mean obviously you know the terms of the lease as we've disclosed. This is a 40-year remaining term roughly on the leasehold interest there. So we felt that this was an appropriate level of pricing and this type of transaction given the asset, given the leaseholds and given the remainder on the lease term.

Okay, thanks guys.

Thank you. And the next question comes from Bill Crow with Raymond James.

Back to Houston. The fourth quarter comps obviously going to be really tough, is it tough enough that it brings your entire portfolio RevPAR in the negative territory for that quarter?

I'll Atish check whether that's actually correct or not, but what I will tell you is that we get the benefit next year of not having renovation in Q4, which we've substantial renovations in the last two years. So we will have a lot more rooms to sell than we had in Q4, 2017 when we had the Oaks out and Q4, 2016 when we had the Galleria out.

As it relates to how it impacts the overall portfolio. I think Atish obviously outlined in his remarks, where we have some more difficult comparisons which is truly here in the first quarter particularly because of the fact that, portfolio wise we're lapping Super Bowl in Houston, we're lapping the fact that we had inauguration in DC, we've got a fair amount of renovations going on here in the first quarter, so we really feel - we view the first quarter as the most challenging quarter for us from a year-over-year comparison.

Yes that's exactly right. Fourth quarter we're expecting it to be positive.

Okay, I was just thinking - down 3.5 in the first and if the fourth quarter caught flattish. It implies pretty good growth for the mid part of the year. Marcel or Barry, are you surprised that Napa hasn't come back quicker?

I think a little bit, but really some of it is and we're seeing some disparate results between our two properties there. The Andaz has come back very quickly. The Marriott has been a little bit more challenged some of that's related to the fact that Marriott does a lot more group business and a lot of quite frankly local kind of Bay Area driven group business. We think the Napa CVB has done a very good job of promoting Napa and we see it coming back solely. But in the case of the hotel, that is typically booking group business a few months out which is a case there, it's just been a little slower to get that ramp back up.

Okay and then, finally from me as I look across your portfolio. I think you mentioned you're at 85% luxury in upper upscale, is that the current? I'm just curious.

95%.

95%, so as we think about what you might sell going forward should we think about that 5%, should we look in some of the more generic, maybe Marriott branded properties whether Charleston West Virginia, you've got a number of what I would call more kind of typical assets that may not a long-term hold, how do we think about what you might look to recycle.

Great question. Where we currently are with, we're clearly and I've said this some of this before, we clearly don't allow the heavy lifting as far as how we transformed the portfolio and upgraded the portfolio, but we probably won't sit on our laurels and say and this is it and it's really going to be driven by what kind of acquisition opportunities we find to and what kind of opportunities do we see to continue to upgrade that portfolio. I think your point is valid to some extent on both counts. I mean there are certain assets on the bottom end of the portfolio that will continue to look at exponentially dispose off longer term that's when you look at your portfolio now probably appear to be a little less core for us, then they may have been before. So there are certainly some of those assets. As it relates to the upscale assets that we still own, the three that we still own post the Aston Waikiki deal. Residence Inn in Denver City Center, the Hilton Garden Inn Washington DC, the Residence Inn Cambridge. So even besides the names of those, you'll recognize that those three are obviously very urban high RevPAR environments and assets that do well very for us from a RevPAR perspective, from an EBITDAR perspective and we believe that there is still some upside to be done from those assets. But to the extent at overtime we find more interesting opportunities in the upper upscale and luxury segments. We could certainly look at potentially cycling out some of those assets over the long-term.

Great. That's it from me. Thank you.

Thank you. And the next question comes from Bryan Maher from B.Riley FBR.

Kind of on the flipside of that last question. What are you seeing in the depth of the market related to a pipeline of acquisitions? Is it getting smaller? Is it getting less expensive with the pullback in a lot of REIT stocks, what are you seeing in that regard?

Good morning, Bryan. I think it's not too dissimilar from what we've already talked about over the last few quarters. As far as what we see in the pipeline, I wouldn't say it's [indiscernible] robust it's definitely a lot of work to try to find assets that fit the criteria that we're looking for at this point. So it contains to be a lot of work of trying to find deals through the brokerage community, through direct deals and trying to find those specific assets that we think are accretive to our portfolio. So I wouldn't say that it necessarily has gone more difficult or less difficult over the last few months. As always when REITs maybe pull back a little bit there is lot of buyers that kind of fill that void to some extent. Certainly some other REITs have done some interesting transactions renounced interesting transactions recently, so couldn't say that REITs are totally out of that business either at this point. But it continues to be a fair amount of work to find the right type of deals. But we're pretty confident that through all the relationships that we have, that we'll continue to find those deals going forward.

Okay, thanks for that. And then on, you talked a little bit about the labor efficiencies and moving stuff around hotels and people around the hotels. How do you look at that versus what we continue to hear of higher wage and benefit cost? And at some point do the higher wage and benefit cost outweigh the benefits you're going to be getting on the efficiencies?

Thanks Bryan. It's certainly overtime those things clearly will meet at some point in any portfolio and even in our portfolio. I think cost pressure with regard to labor is certainly in those markets and we continue to look at and adjust wages and benefits in order to be competitive and that's certainly true. We do have, we have a relative advantage we think of being in a lot of markets where labor is more plentiful in on balance and it is in some other more concentrated urban markets. So there is a little bit of deeper pool people who are interested and working in hotels and working in markets and environments that offer competitive wages and great benefit. So but certainly there is a time when those will cross and there is no question we're feeling the same pressures on wages and benefits as the industry is.

I'll just add to that, we do feel that our geographic mix to various point has helped us in that regard to be able to maintain margins and increase margin and the kind of RevPAR that we've been in so, we've felt over the last couple of years and still feel, that's - that even at somewhat muted RevPAR growth we will be able to maintain those margins just because of some of our geographic mix versus some of our peers.

Okay, thanks that's helpful.

Thank you. And the next question comes from Brian Dobson with Nomura.

Just a quick question, well two quick questions. First on guidance, does your guidance I guess include any allowance for strengthening economic trends or any improving group demand trends that other companies are seeing later in the year or is it appropriately conservative? And then just real quick on your ROI projects. What's the average hurdle rate on the projects that are being undertaken over the next 12 to 18 months? In the longer term you alluded to some property that could be developed, what would the hurdle rate be on that type of development?

Well I'll take the first question on guidance, Brian. I think the budget process obviously starts earlier many months ago, but the guidance that we gave today really reflects our view of the outlook as of today and I don't think there is any sort of conservatism or optimism built into the guidance. It's frankly our best estimate as how the year is going to progress based on all the facts we know as of today. Certainly higher levels of economic growth that might emerge due to the tax built that could translate into more optimism but frankly we haven't built any, all of what we know today is been incorporated to our guidance, so that and the question on returns.

Yes on the ROI side on the projects we're undertaking. Clearly we strive to be prudent capital allocators on the way that we spent our variable resources. So when we look at doing these projects as always to note, telling the Street some of the expenditures are defensive and some of them are maintenance. But really when you're looking on doing these projects, we're looking for low double-digit returns at least on these types of investments. So we certainly feel those are achievable with the types of projects that we're undertaking here. And as we've talked about quite a bit over the last year or two, we always looked at 2017 and 2018 as two years, where we would have some increased expenditures because of some cycles renovations we're coming up with, but also just pooling in some renovations because we felt there was an appropriate time, during a time where maybe demand wasn't going to be quite as robust and the RevPAR environment wasn't going to be quite as robust to really set us up for some upside growth going forward. So that's what we're really continuing to execute on, so we feel very good about that. As it relates to the other thing, that Barry mentioned as far as some of the additional ROI opportunities that might be at Grand Cypress. It's really too early to talk about some of those, we've identified when we went into the asset and did the acquisition. It was very clear to us that we felt there was a real benefit from doing a rooms renovations here in summer. We feel there is real upside in doing this ballroom development that we've talked about, but we were intrigued but some of the additional land that we have available at the property, where we may be able to do some other things. So that's really something we're going to have to work out as we continue the ownership of the hotel here and start analyzing some of them.

All right. Thank you very much.

Thank you. And as there are no more questions to present time. I would like to return the call to Mr. Verbaas for any closing comments.

Thank you Keith and well thanks everyone for joining our call today. I'd like to just reiterate how delighted we were by our activity and result in 2017 and what was a pretty challenging environment. So we believe we were good allocators of capital during the year. We made significant progress in improving the quality of our assets, executing on the project to enhance long-term value of the company and positioning the balance sheet to once again be opportunistic going forward. So we look forward to sharing the progress in 2018 as we continue to execute against our strategy.

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