Xenia Hotels & Resorts, Inc. (XHR) Q1 2018 Earnings Report, Transcript and Summary

Good day, and welcome to the Xenia Hotels & Resorts First Quarter 2018 Earnings Conference Call. All participants will be in 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. Good afternoon, everyone, and welcome to the First Quarter 2018 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 an overview of our quarterly results and recent activities. Barry will follow with additional details on our portfolio results and operational highlights as well as a detailed discussion on our capital expenditure projects. And Atish will conclude our remarks with a discussion of our current balance sheet and revised 2018 outlook. 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 and the earnings release that we issued earlier this morning, along with the comments on this call, are made only as of today, May 3, 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 afternoon, everyone. Thank you for joining our call this quarter. As anticipated, the first quarter was challenging from a comparison perspective for our portfolio. A substantial portion of our portfolio, representing approximately 15% of our total room count, was impacted by guest room renovations during the quarter. Additionally, we lapped a very strong first quarter in 2017 when our current same-property portfolio achieved a 4.3% RevPAR increase. That being said, our top line results came in ahead of the expectations we outlined on our last call as business levels in March were stronger than anticipated. We also were pleased with our bottom line performance as we continue to find efficiencies operationally despite a decline in RevPAR. During the quarter, we had net income attributable to common stockholders of $55.7 million, which was largely due to a $42.3 million gain on the sale of Aston Waikiki Beach Hotel. Our adjusted EBITDAre was $73.7 million, an increase of 24.7% over last year. And our adjusted FFO per share grew 20.5% to $0.53. These significant increases to EBITDAre and FFO were the result of the acquisitions we completed in 2017 and corresponding seasonality changes in the portfolio as demand in the Orlando and Phoenix markets is particularly strong during this time period. Our same-property RevPAR declined 2.8% in the first quarter, modestly ahead of our expectations discussed during our last earnings call. January and February RevPAR were down 0.9% and 6.2% respectively. As it relates to March, we anticipated that our portfolio would be impacted by significant renovation disruption as well as reduced group business demand during the latter part of the month as a result of the Easter shift. However, several of our hotels exceeded our expectations during the month. As a result, RevPAR in March decreased by only 1.4%. While we dealt with difficult comparisons in Houston and Washington, D.C. as well as renovation impact in these two markets and several of our smaller markets, our hotels in Orlando, Phoenix, Boston, Santa Clara, Atlanta, Philadelphia, San Diego and Salt Lake City performed particularly well during the quarter. The strength we experienced in these markets as well as our approximately 6% same-property RevPAR growth in April gives us confidence in our outlook for 2018. The largest negative impact to our first quarter results came from significant renovation activity. Seven of our hotels were impacted by guest room renovations. We estimate same-property RevPAR was negatively impacted by approximately 215 basis points from these renovations, which was in line with our expectations as we came into the quarter. Barry will discuss each renovation in detail later in the call, but overall, we are extremely pleased with the improvements we have made across the portfolio today. As we have discussed previously, it was a strategic decision to accelerate several of these projects through 2017 and 2018 to enable our hotels to be well positioned for growth in 2019 and beyond. We believe that the completion of these renovations as well as our planned rooms renovations at Hyatt Regency Grand Cypress and Marriott Dallas City Center later this year will be significant factors in driving strong internal growth. In addition to the headwinds we face from renovations, our properties in Santa Barbara, Key West and Napa continue to experience some challenges in their recovery from the various natural disasters that impacted our portfolio in the second half of 2017. Our property in Key West, the Hyatt Centric Resort & Spa, underperformed the rest of the market this quarter as we completed our remediation work at the hotel, which primarily consisted of sealing and painting the entire property. On the bright side, the overall Key West market demand outlook has strengthened, with Key West showing only a slight RevPAR decline during the quarter. We look forward to continued improvement in these markets and at our hotel as business levels return to normal. The Napa lodging market is off to a lackluster start this year following the wildfires in the fourth quarter of 2017, especially as it relates to group reduction. However, looking to the rest of the year, we are optimistic as group business in Napa appears to be returning to a more normalized level, with lead volume picking up for later this year. We continue to work with insurers to evaluate and quantify the business lost at each of our properties resulting from these natural disasters, although the final dollar amount of business interruption proceeds is still being determined. As it relates to operating margins, we were pleased with the performance of our portfolio during the quarter, with same-property hotel EBITDA margin declining by 73 basis points on our 2.8% RevPAR decline. Here, the comparison to last year was also a difficult one since our current same-property portfolio increased margins by 156 basis points during the first quarter of 2017. On the transaction side of the business, in March, we completed our previously announced sale of the leasehold interest in Aston Waikiki Beach Hotel in Oahu for $200 million. As a reminder, the sale price represented a 12.6x multiple on the hotel’s 2017 EBITDA. While we have previously spoken about this transaction, I would like to reiterate that we were very pleased with the results of our sales process and the pricing we were able to achieve. The Aston Waikiki represented a lower-quality hotel with a relatively short term remaining on its ground lease. This transaction further exemplified our continued enhancement of the portfolio through transactions as well as capital improvements. Through transactions such as the Aston Waikiki sale and the various acquisitions and dispositions we completed in 2017, we have continued to improve the overall quality of the portfolio, a fact that is evidenced in total portfolio RevPAR being almost 8% higher during the first quarter this year as compared to 2017. We are pleased with the early results of our recent acquisitions and look forward to driving continued growth through our portfolio initiatives. As we look ahead to further potential transaction activity, our disciplined approach to acquisitions and dispositions will continue to guide our decision-making process. While we are actively evaluating a number of opportunities in our pipeline and believe we will be able to find additional properties that meet our strategic and return requirements, we are very comfortable with the quality of our current portfolio and the internal growth we expect to be able to achieve. We also remain very pleased with the transactions we completed last year and particularly the pricing at which we were able to add a number of high-quality assets that are right on strategy for our company. Our balance sheet remains in excellent shape, and we have liquidity and flexibility to take advantage of opportunities as they arise, even more so as a result of the Aston Waikiki sale. I will now turn it over to Barry, and he will discuss our first quarter performance and renovation projects in greater detail.

Thank you, Marcel, and good afternoon. As Marcel mentioned, our first quarter performance was impacted by a variety of factors that ultimately exceeded our expectations slightly despite the Easter calendar shift and Super Bowl and inauguration lap year-over-year. As a reminder, our same-property portfolio consisted of 38 hotels we own today. Same-property RevPAR declined 2.8% for the quarter as occupancy declined 60 basis points and ADR declined 2%. Our group business was down approximately 6% for the quarter compared to last year, with transient and contract business declining by approximately 1%. These declines are primarily related to the shift in Easter holiday, which impacted our group business as well as impact from our hotels that were under renovation during the quarter. Our group mix for the quarter was approximately 35%, reflecting the addition of our 2 new large group hotels: Hyatt Regency Grand Cypress; and Hyatt Regency Scottsdale, which drive a higher percentage of our overall portfolio in Q1. Our top-performing markets during the quarter were San Diego, with RevPAR up 34%, primarily due to the guest room renovation at the Andaz San Diego last year; Santa Clara, up 9.5%; Salt Lake City, up 9.4%; Orlando, up 5.6%; and Philadelphia, up 4.6%. Our most challenged market for the quarter was Key West, down 24% as we completed the remediation work. Other notable markets with RevPAR declines for the quarter included Denver, down 22%, as both of our hotels in the market were under renovation in the quarter; Washington, D.C., down 20%, with renovation disruption coupled with the inaugural lap year-over-year; and Charleston, South Carolina and Portland, both down approximately 15%. We were pleased with our margin performance for the quarter, which was down 73 basis points despite the 2.8% decline in RevPAR. Our performance is aided by an adjustment to the methodology used to accrue the incentive management fee at our recent Hyatt acquisitions, which accounted for approximately 40 basis points. Operating expenses were well controlled during the quarter, with departmental expenses declining by 1% and undistributed expenses increasing by only 0.6%. We continue the momentum with our property optimization process, which is scheduled to take place at eight hotels this year, including revisiting several of our more complex properties that were initially reviewed several years ago. In the first quarter, reviews were conducted at our recently acquired Hyatt Regency Scottsdale and Royal Palms Resort. We continue to be pleased with the results of our process as we continue to find opportunities for increased operational efficiencies following these reviews. I would now like to discuss the significant progress made on our capital projects and major renovations during the quarter. We spent approximately $24 million in the first quarter on capital projects. As Marcel mentioned, seven hotels, representing nearly 15% of our total room count, were impacted by significant guest room renovations during the quarter. We completed five of these projects during the quarter, another just subsequent to quarter end and one more that we’ll wrap up next week. The majority of our projects were complete renovations of guest rooms, guest corridors and bathrooms, including the conversion of a large number of bathtubs to walk-in showers in order to improve each hotel’s competitive position within its market. Xenia’s typical guest room and guest corridor renovation program includes a complete overhaul of all aspects of our hotel rooms. We replace carpet and base, wall vinyl and paint, window treatments, artwork and mirrors and decorative lighting. Additionally, we replace or refinish upholstered seating, headboards, nightstands, desks, consoles and dressers and tables. Xenia’s typical guest bathroom renovation includes the replacement of vanities, wallcoverings, mirrors, sliding door systems and accessories and amenities. During the quarter, guest room renovations were completed or substantially completed at Lorien Hotel & Spa, Hotel Monaco Denver, Residence Inn Denver City Center, Hilton Garden Inn Washington D.C., Marriott Chicago at Medical District/UIC, Andaz Savannah and Westin Oaks. At the Marriott San Francisco Airport Waterfront, we completed the lobby and great room renovation, including redevelopment of the lobby bar, replacement of all flooring surfaces and new furniture, along with the addition of 45 new seats. Additionally, we completed restaurant repositionings and reconceptings at both Hotel Monaco Chicago and RiverPlace Hotel. At Monaco Chicago, the former South Water Kitchen space was transformed into Fisk & Co., a Belgian bistro cuisine-focused restaurant and lounge, featuring a wide variety of Belgian beers and craft cocktails. Over 1,500 square feet was carved out of the existing restaurant to create three private dining and meeting spaces, two of which have natural lighting. At RiverPlace in Portland, the former Three Degrees outlet was transformed into King Tide Fish & Shell, featuring American seafood classics. This renovation reduced the size of the restaurant while expanding the bar area and created additional outdoor patio seating, a new private dining room and a fitness facility, something the hotel was lacking prior to this renovation. The Westin Galleria Houston lobby renovation, including the addition of a new lobby bar and transformation of the 24th floor have now been completed. The 24th floor renovation included a complete renovation of the meeting space on that level as well as a repurposing of the remainder of the floor into a new concierge lounge and high-end fitness space. We are thrilled with the results here and are receiving very positive feedback from guests at the hotel. We look forward to renovating the meeting space at the hotel this summer, and we’ll then have a nearly brand-new property. As you can imagine, these renovations required a tremendous amount of work from both internal and external resources. We are extremely pleased with the way our in-house project management team and specifically our four dedicated vice presidents of project management were able to manage design, contracting, supervision and punch lists for these multiple projects simultaneously, delivering all of them within our budget and timing expectations. Projects of this magnitude require a significant number of field-based decisions in dealing with issues as they arise and our project management and asset management teams, along with our property managers, handle these with aplomb. The success of these projects further proves the value of our unique strategy of having a dedicated in-house project management team and long-range capital planning function. As we have discussed previously, we continue to strongly believe each of these renovations will allow our hotels to maintain and enhance their competitive market positioning in each of their respective markets, and we expect to see significant performance improvements from these projects now that they are completed. We are looking forward to a productive remainder of the year in the CapEx area in Q2 and Q3 with the guest room renovation at Marriott Dallas City Center, which will include bathtub to walk-in shower conversions in 75% of the guest rooms, the guest room renovation at Hyatt Regency Grand Cypress and the renovation of nearly 70,000 square feet of meeting space at the Marriott Woodlands. In Q4, we expect to renovate the meeting space of Palomar Philadelphia, create a grab-and-go market and coffee bar at space 1 of the lobby renovation at Hyatt Regency Santa Clara and renovate the restaurant and licensed Starbucks outlet at the Marriott San Francisco Airport. Finally, by year-end, we expect to commence construction on the new 25,000 square-foot ballroom, with 30,000 square feet of ancillary prefunction and support space, at Hyatt Regency Grand Cypress and hope to open that facility in the fourth quarter of 2019. The addition of a second ballroom at this property is expected to provide a strong return on investment as this expansion will allow the hotel to increase and better balance group bookings within this dynamic market and enable it to compete more effectively going forward. With that, I will turn the call over to Atish.

Thanks, Barry. I will discuss 2 topics this afternoon. First, I will discuss our financial profile and balance sheet. Second, I will discuss our revised outlook for 2018. First, our financial profile continues to be strong. We remain well poised to take advantage of opportunities as they arise. As previously discussed, our goal was to reduce our leverage to sub-4 times. Subsequent to the sale of the Aston Waikiki in March, our leverage ratio at the end of the quarter was 3.9 times. Additionally, we have no preferred equity or other senior capital on our balance sheet. Our current liquidity remains strong. We have approximately $170 million of unrestricted cash and a fully undrawn $500 million line of credit. We continue to be prudent with our capital allocation, and we’ll utilize this liquidity as we see fit to further address near-term debt maturities or invest in internal and external growth opportunities. Turning to our recent balance sheet activities. In January, we amended our line of credit to increase the total capacity to $500 million. We extended the maturity date by 3 years to 2022. Also, we entered into a $65 million loan secured by The Ritz-Carlton Pentagon City. This is a 7-year variable rate loan at an attractive rate of LIBOR plus 210 basis points. During the quarter, we repaid the $18 million Hotel Monaco Chicago mortgage loan. And subsequent to quarter end, we also paid off 2 mortgages totaling $62.5 million. Pro forma for these loan payoffs, our fixed-rate debt, inclusive of hedges, represents over 75% of our total debt. This is about the same level as this time last year. Our fixed-charge coverage ratio is 4.7 times. Also, during the quarter, we entered into an "At the Market" program to sell common stock. We implemented the ATM program to give us flexibility to opportunistically raise up to $200 million of equity capital at a relatively low cost. Similar to our share buyback authorization, the ATM is a valuable tool, which will allow us to access the capital markets when appropriate. There was no sales activity on the ATM in the first quarter nor did we utilize our share repurchase authorization to buy back any stock. Turning ahead to our outlook. As we look forward to the remainder of the year, we have revised our full year guidance for the outperformance we experienced in the first quarter but have made no adjustments to our expectations for the balance of the year. We currently expect our adjusted EBITDAre to be between $286 million and $296 million. Moving ahead to adjusted FFO, we are currently projecting to earn between $228 million and $238 million, resulting in $2.13 to $2.23 of adjusted FFO per share. This represents over a 5.5% growth on a per-share basis compared to 2017. The change to our adjusted FFO guidance incorporates our adjusted EBITDAre guidance as well as slightly lower estimated income tax expense. Neither interest expense nor G&A expense guidance is changed from last quarter. Now turning to full year RevPAR growth. We have increased the midpoint of our RevPAR growth range by 25 basis points. As a reminder, when we last issued guidance, we expected first quarter RevPAR to decline approximately 3.5%. The beat in the first quarter has been added to our full year guidance, and there were no other changes to our RevPAR outlook for the three remaining quarters of 2018. We continue to anticipate approximately 75 basis points of negative impact to RevPAR as a result of renovations this year. Approximately two-thirds of this impact was experienced in the first quarter. Most of the disruption we expect during the remainder of 2018 is expected in the third quarter. Our guest room renovations at Hyatt Regency Grand Cypress and Marriott Dallas City Center are expected to be underway at that time. Turning to group pace. The renovations and challenging year-over-year comparisons in several of our markets continue to impact our group pace -- our group revenue pace for the year. Our group revenue pace continues to be flat year-over-year, with over 80% of our budgeted group business for 2018 on the books at this point. As the transient businesses continue to be challenging to predict, we are hopeful that higher levels of economic growth will result in strong transient demand, particularly as it relates to business travel. To wrap up, we made significant progress improving the composition and growth outlook of the portfolio over the past year. Our strong balance sheet positions us well for future opportunities. That concludes our prepared remarks. We will now open the call to Q&A.

Thank you. We will now begin the question-and-answer session. [Operator Instructions]. Our first question comes from Brian Dobson with Nomura Instinet. Please go ahead.

So, I was hoping you could flesh out a little bit just exactly what you’re seeing in terms of business transient, leisure transient and group demand trends through the remainder of the year. Are you hearing anything from your top clients and corporate travel planners regarding their budgets or outlook for business travel?

Thanks, Brian. What I’d like to start with maybe is looking backwards and looking at Q1 and through April and looking really at the demand side of the business, which we feel very good about, and that -- and really in our case, kind of the past and present are really the best indicators of the future. For us to be down only 60 basis points in same-property occupancy for Q1 despite the renovations, especially then lapping and natural discovery, the natural disaster recovery headwinds we had, I think speaks volumes on demand being strong across many segments. What we are doing is we’re spending more time than ever here focusing on revenue management strategies with our operators and really trying to balance demand with rate. In terms of the specific segments, corporate demand, especially negotiated corporate demand, was robust in Q1. So we certainly would anticipate seeing that continue as we move, and certainly as we’ve been through April, and look to move through the rest of the year. Leisure demand was also strong, with some notable increases in some of the key leisure channels like package and AAA business, some of the more discounted channels, which is interesting but demand certainly was there. Group business for us was down for the quarter, but as Atish noted, we expect it to be flat for the year. We do continue, and I think this is relevant to group demand, we certainly do continue to see increases in banquet food and beverage groups, both kind of in advance of their programs, upping their food and beverage menus as well as on-site additions and upgrades. I think, certainly, our preliminary results for April provide support for those trends. And when we blend March and April data together, which we think is really important to do and obviously, you don’t have all the detail on that yet, but we feel very good about demand across all the segments as we move through the rest of the year.

All right. Great. And as you’re looking out over the next, say, 2 years or so, are you equally as confident in the continued expansion of the cycle as you have been over the past, say, 2 or 3 quarters?

Yes, I don’t think our, and this is Marcel, Brian. I don’t think our outlook has meaningfully changed there. Clearly, we’re in a part of the cycle where supply has been ticking up a bit in many markets over the last couple of years, basically. And certainly, there is some more supply being added in ‘18 and ‘19. We do think we’re in a relatively balanced situation there when we look at demand growth and supply growth. So we are still expecting moderate RevPAR growth going forward for this year, obviously, and a little too early to really talk about what we expect for ‘19. But certainly, we think we’ve set up our portfolio well to deal with some of the supply increases that are coming in certain markets, and we’ve obviously focused on letting our conversations with, or just when we’ve spoken about what our outlook is, that we’ve always looked at wanting to make sure we have a great fresh product to compete with some of these new supply increases that are coming into our markets and we think we’ve been, we’re well on our way to completing them.

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

Marcel, let’s start with you. I thought you sounded upbeat when talking about the potential acquisition environment out there, and I know everybody else is kind of talking about the lack of assets on the market. Are you, has things, have things improved, either the quantity or the quality of the assets? Or are you finding some opportunities in privately negotiated deals?

Well, Bill, I think maybe it’s because history is more, again, a prognosticator for the future there. We’ve been able to find deals over the past few years in environments that have been relatively difficult at those times too to find interesting opportunities. And I would probably echo what you’ve heard from other people, is that pipelines aren’t necessarily terribly deep and it does take a fair amount of work to find the right kind of acquisition opportunities that are a good strategic fit and that we think are really additive to our portfolio going forward. So I wouldn’t say that’s -- again, I wouldn’t say it’s terribly deep, but I would say that based on what we’ve been able to do over the past few years and finding acquisition opportunities through many different sources gives us some optimism that we’ll be able to find some assets that will be additive to our portfolio going forward.

Great. And for Barry, I think. I just wonder if you could help us think about Houston and D.C. If you strip away the hurricane uplift that came in the fall and the tough Super Bowl comp, we do have oil prices that have rallied. And I’m just wondering if we strip all that away, is this a market that’s improving, is it stagnant. What does the market look like today? And the same with D.C., with the comp from a year ago and your renovation disruptions, just kind of get your perspective on what you think about that market as we look forward to the next -- the balance of the year.

Yes, I’ll take Houston first, obviously, as a market, and we continue to see lots of different things in that market, particularly being positioned in both the Galleria and The Woodlands. Overall, the Woodlands market has continued to be extremely strong through this year, but that market always enjoyed a little more FEMA business than the Galleria market did, not necessarily again in our hotel, the Marriott, but in that market. So we’re continuing to see pretty strong high single-digit growth in that market through Q1 of this year, again in the overall Woodlands market. The Galleria, it’s been a little bit softer than that as a market overall. But a lot of that, there was a lot of noise in February, which is really hard to strip out because of the Super Bowl last year. We are looking for our hotels in Houston for relatively flat RevPAR over the course of the year. But that doesn’t really account for -- we’ve got a very large meeting room renovation at the Woodlands over the summer on the 70,000 square feet of meeting space there. What we are seeing, I think, internally as it relates specifically to the Galleria as we complete that renovation, this is -- we have really well-positioned that property in terms of both its guest rooms in both towers, which are now nearly complete as well as the work I mentioned at the Galleria tower. But we really feel we’ve got the best property in the Galleria market, and certainly, we’re seeing, in particular as it relates to the increased price of oil, heightened demand from our corporate accounts in that market, whether they’re directly energy-related or we’re starting to see some return of that consulting business and other businesses that really support that.

So Barry, let me interrupt before you go out to D.C. and just ask, is the outlook for Houston this year, is that like what it was in ‘16 without all the noise or ‘15 or do you have a sense for where it is?

I’m trying to think on the spot, Bill, about what each of those years really represented in terms of -- I mean, obviously, both those years saw -- we had pretty significant declines. And we’re -- again, we expect to be flat for this year even with some renovation noise in both properties, obviously at the Oaks in Q1 and at the Woodlands through the summer. So I think that speaks to some expectation of more significant growth. Certainly, a growth rather than a decline, if you strip those pieces out of it.

Okay. And D.C.?

D.C. is interesting because we really play in three, now three different submarkets in D.C. We have our Hilton Garden Inn on 14th Street, which really plays to kind of core corporate demand as well as strong weekend leisure demand. And then we’ve got our Lorien Hotel in Alexandria, which, again, plays to that -- plays well in the Alexandria corporate market during the week and then also does a great weekend leisure business as well. And then finally, probably the most significant of those that we’re still getting to know, is The Ritz-Carlton Pentagon City, which obviously does a significant amount of corporate- and government-driven business mid-week and a little bit softer on the weekends. And of course, not having seen -- not having had that hotel last year makes it a little hard for us to really understand how much inauguration lift they had. Overall, and again, we did big room renovations at both -- we made full room renovations at both Hilton Garden Inn and at the Lorien. We expect the 3 D.C. hotels to be down about 2.6% in -- 2.5%, 3% in RevPAR for the year. But when we look at that, it’s really about what -- that displacement in Q1 for these hotels, which -- so we not only had the lift last year, we had the displacement this year in those hotels. So it’s really hard to get to what the stabilized market is. And again, we’re really trying -- we’re still digging in and understanding the opportunities at Ritz Pentagon City.

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

Hey, how are you. So you guys, through your RevPAR guidance, you just raised it by the 1Q beat. It feels like your peers are raising it because there’s a brighter outlook. Are you just being conservative? Or is it renovations? I mean, what’s going on?

Hey, Tom, it’s Atish. No, I don’t think it’s a question of conservative. It’s -- frankly, we raised it by the 1 quarter beat, and we’ve got flat pace for the full year on the group side. And it’s really -- it’s still a little early to get a full read on the transient side. I mean, leisure, obviously, continues to be strong. But the corporate transient piece, because we had tough comps as well as renovations, it’s -- we really want to see a little bit more of that activity before having a better sense really of certainly the back half of the year. So our guidance really reflects kind of our view on the full year as of now.

Okay. And then you highlighted the strength in Orlando. There’s some commentary in the market, the strength in Florida this quarter, it was kind of -- it’s going to be temporary because the Caribbean’s out. I’m guessing that’s more of a Southern Florida phenomenon. But do you feel like that could be the case that we’re kind of -- we should be worried about tougher kind of 4Q, 1Q next year comps or not for Orlando?

I think a little bit of difference, Thomas, between Q4 and Q1. Q4 certainly, I think we talked about this, Q4, Orlando definitely got some benefit from both the Caribbean and South Florida, in particular. We’re not seeing that in Q1. We think, on a relative size basis, the Caribbean market is fairly small relative to the size of the Orlando market, and that most of that business pushed into South Florida rather than Orlando. We’ve got a lot of very positive demand growth opportunities here specifically related to new attractions in the market, both this year and next year. So we’re not expecting to be talking about a tough comp in Q1 next year for Orlando.

Okay. And then just final, more of a housekeeping question. So the Dallas and Orlando room renovations, you have good momentum in both of those markets. Are those going to hit second quarter a little bit? I heard your comment that it’s mostly a third quarter phenomenon. I’m just thinking, should we be assuming a bit of a slowdown in comps in second quarter, but you’ll start to see some of those -- that reno impact?

Yes. you’ll see very little. The Orlando renovation was really designed through summer when we rely heavily on transient business and that generally, we were able to coordinate that work in a way where we expect very little disruption in that hotel. The Dallas renovation is a little bit deeper because it includes tubs to showers. But certainly, Q2 and into early Q3 is the best time to do that renovation. We’ll see some displacement from that, but nowhere near of something the magnitude that we’ve looked at across the portfolio in Q1.

And typically, just summer is a very slow period of time for business in Dallas. So it is absolutely the right time to schedule it during that time frame.

Our next question comes from Bryan Maher with B. Riley FBR. Please go ahead.

So kind of following a little bit along the renovation questioning, aside from the Grand Cypress ballroom in -- that will be going on in 2019, is there anything in 2019 and 2020 that we should be thinking about relative to renovations when we model the company?

Well, certainly, there will be some regular cycle renovations that will be happening in ‘19 and ‘20. It’s not anywhere near the level that we’re seeing this year. Obviously, absent any kind of additional changes we might be making to the portfolio to the extent that we find acquisition opportunities that add to that, obviously, that changes the equation a little bit. But as it stands now, the most significant one that we have coming up is the Woodlands -- Marriott Woodlands room renovation that will be occurring in ‘19, and that’s probably the most meaningful one we’re looking at just going into next year.

Okay. And then as it comes to the acquisition pipeline and what we’re hearing kind of across all the lodging companies relative to pricing, does that make you think about maybe selling a property or two into this kind of elevated pricing environment other than Aston?

Well, I mean, certainly, we’ve, over the last two years, we’ve sold a fair number of assets. And we’re not necessarily opposed to that, but we think that there’s a lot of value that we can derive from our portfolio, there’s a lot of value that we can create and that we are creating through the things that we’ve done in the portfolio, and the renovation’s being one piece of that. Clearly, we’ll look to maximize valuation for the company for the shareholders over the long term, and we’d consider some of that. But as we sit here today, we think that there’s a lot of growth that we can get out of the portfolio, and we’re comfortable with the portfolio. And that we -- at this point, it’s still a little bit similar to what I talked about in the last quarter, which is to the extent that we find very interesting acquisition opportunities that we think have greater growth opportunity for us, that might get us a little bit more interested in selling some additional assets. But we’ll continue to look at do we prune some assets on the low end of the portfolio. We certainly are the type of company that doesn’t just sit back. And it’s just very comfortable to saying, this is it, we’re not reshaping the portfolio any further, and we will continue to look to upgrade the portfolio over time and that will be our mindset as we go forward.

Our next question comes from Jeff Donnelly with Wells Fargo. Please go ahead.

Just first, just a housekeeping question. I missed your statement earlier about how much EBITDA do you expect to lose in ‘18 from renovations.

How much EBITDA do we expect to lose? I’m sorry. Was that your question, Jeff?

Yes. From renovations. I wasn’t sure if you had given the figure. I might have missed it.

No, we did not. We did not speak to that.

Do you give an estimate or…

No, for ‘19, no. I wouldn’t be able to speak to that exactly. I mean, we are still obviously fine-tuning what our projects look like going into next year. I don’t have you talking about ‘18 or ‘19. I heard you say ‘19.

‘18, sorry.

No, we haven’t talked specifically about the EBITDA number, but we’ve talked about the guidance being about 75 basis points of RevPAR that we’re losing because of our renovations. And as you know, when you think about 1 point in RevPAR for the company, for us, we’re looking at about $8 million to $10 million of EBITDA. I think that corresponds to it. So if you look at that 75 basis points, I mean, then obviously a good amount in there.

Okay. That’s helpful. And maybe this is one for Barry, just since Marriott and the Starwood have combined, I mean, they obviously gained significant presence in some cities, like Boston being one of them. Do you feel their sort of heady market share on the managed side of the business is potentially impacting other hotels in the market or particularly like a hotel like the Commonwealth, which isn’t flagged? Have you guys seen any impact from that?

I can certainly speak to Boston, the Commonwealth, where we have not seen that, for sure. I think the benefits of that combination are still, can evolve this year, particularly as they combine the frequent guest programs later in the year, and I think we’ll be able to have a better sense of that as they combine the frequent guest programs, they really converge and combine the sales organizations. But in those markets that have larger presence and we don’t, we’ve not particularly felt impact from that Marriott-Starwood machine.

And maybe somewhat related to that, you guys have a good number of independent hotels. I mean, do you expect to see situations where it could be financially advantageous to you to flag those assets, whether that’s key money just because brands start looking for conversion opportunities or revenue production? Or do you think it’s better at this point to keep them unflagged?

We have 18 hotels that we kind of consider in, to be in the boutique lifestyle space, but a large majority of those are branded, with the Commonwealth being the only true independent. So we have a lot of properties that are soft-branded or play in the boutique space. We have, we evaluate opportunities on brand changes where we have those opportunities all the time, but there’s been nothing that we’ve seen so far from the consolidation of the brands that’s led us to think we should accelerate that strategy or identify more properties to that. We just haven’t felt that kind of impact thus far with the concentration of larger brands.

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

Thank you. Thank you, everyone, for joining us on our, this quarter’s call, and we look forward to speaking with you again in the next quarter. Thank you.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.