Good morning. Welcome to Fourth Quarter 2019 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask question. [Operator Instructions] Please note, this event is being recorded.I would now like to turn the conference over to Lisa Ramey, VP of Finance. Please go ahead.

Thank you, Kate. Good morning, everyone and welcome to the fourth quarter and full year 2019 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 Executive Vice President and Chief Financial Officer.Marcel will begin with a discussion of our operating results and our 2019 achievements. Barry will follow with more details about fourth quarter and full year 2019 results and details on our capital expenditure projects. And Atish will conclude our remarks with a discussion of our 2020 guidance and a review of 2019 capital markets activity. 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 yesterday along with the comments on this call are made only as of today, February 25, 2020 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 yesterday'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 and thank you for joining our call today. We are happy to report what we believe was a successful fourth quarter and full year 2019. We were hopeful that in 2019 our portfolio would outperform following our strategic renovation activity in 2017 and 2018 and our results came in ahead of the expectations we expressed at the start of the year.During the quarter, we had net income attributable to common stockholders of $15.6 million. Adjusted EBITDAre was $72 million and adjusted FFO per diluted share was $0.58.Our same-property RevPAR decreased 0.4% in the fourth quarter and our same-property hotel EBITDA margin decreased by 39 basis points with both measures exceeding our expectations for the quarter. For full year 2019, we had net income attributable to common stockholders of $55.4 million.Our adjusted EBITDAre of $302.1 million exceeded the high end of the guidance range we provided in November and was above the midpoint of the range provided at the beginning of 2019. Adjusted FFO per share was $2.19, which was above the high end of the guidance range we provided for 2019 at the beginning of the year. Aggressive asset management initiatives and leveraging our relationships with both brands and managers continues to be a pillar of our organization and the strength of our team overall.We continue to maintain best-in-class performance as it relates to expense control with same-property portfolio margin growth for the fifth consecutive year, an achievement that is unrivaled by our peers. Our operators' focus on expense controls, while maintaining guest satisfaction remains exemplary as evidenced by full year same-property hotel EBITDA margin growth of 23 basis points on a 2% increase in same-property portfolio RevPAR.Total same-property operating expenses were only up 1.7%, which we believe to be an impressive result relative to our…

Thank you, Marcel. As a reminder, all portfolio information I'll be speaking about is reported on a same-property basis for 38 of the 39 hotels owned at year-end, which excludes Hyatt Regency Portland. The hotel recently commenced operations this past December will be excluded from our same-property portfolio in 2020.Same-property RevPAR declined 0.4% for the quarter as a result of a 7 basis point decrease in occupancy and a 0.3% decrease in rate. RevPAR was down 3.4% in October, due primarily to the Jewish holiday shift up 0.5% in November and up 3.4% in December. Tangi RevPAR for the quarter grew 2.1% while group RevPAR declined 6.2%.Non-rooms revenues continue to be a strength for us, up 1.2% contributing to a 0.3% increase in the same-property total revenues for the quarter. When looking at our top 10 markets based on 2019 hotel EBITDA our top performers for the quarter were San Francisco up 4.6%; Phoenix up 3.2%; Napa up 2.9%; Atlanta up 2.8%; and Orlando up 2.6%.The overall San Francisco market benefited from strong citywide compression during the quarter, which enabled the Marriott San Francisco Airport to drive rates despite flat occupancy. Our Phoenix performance was driven entirely by Hyatt Regency Gainey Ranch, which grew RevPAR and gained share with strong transient production, which offset softer group business.Both Napa properties saw strong demand despite softer rates due to nearby fires. In Atlanta, Renaissance Atlanta Waverly saw strong group performance with several high-quality meeting events and the Waldorf Astoria, Buckhead saw improvement. The stronger group base and changes in property leadership allowed the hotel to meet our expectations.All three of our Orlando properties had RevPAR growth in the fourth quarter as the overall market rebounded with strong citywide performance in December after a softer October and November as well as good transient…

Thanks, Barry. I will cover two topics today. First, I'll discuss our 2020 outlook. And then I will turn to, a brief review of our balance sheet progress, over the past year. As to 2020, we currently expect overall demand to generally be stable across our portfolio.But we expect this year to be a transitional year that prepares us for solid growth in 2021 and beyond. Specifically, we are expecting this year's profitability relative to last year to be moderated by three main items.First, renovations; second the impact of transactions on a net basis, and third, higher expenses. I'll speak about each of these items, individually. As to renovation activity this year is scheduled to be a busy one. We expect this year's renovation to generate strong growth, for the company in 2021 and beyond, just as the renovations that we completed in 2018, generated strong growth for us last year.This year we expect displacement, due to renovation to cause about 100 basis points of negative impact to same-property RevPAR. We also expect these renovations to displace non-rooms revenues, such as food and beverage and ancillary revenues.The negative impact to EBITDA margins from renovations is expected to be approximately 65 basis points. We expect renovations to negatively impact adjusted EBITDAre by approximately $12 million. And this impact will be more concentrated in the first half of the year.Secondly, the three transactions completed last year as well as the one announced yesterday, are expected to result in a net $8 million year-over-year decline in EBITDA. The breakdown is as follows.The two dispositions we completed in December generated $8 million, in EBITDA, in 2019. The Portland acquisition is expected to generate $7 million of EBITDA this year, which is consistent with our underwriting.Given the expected timing of the Renaissance Austin disposition, we…

We will now begin the question-and-answer session. [Operator Instructions] Our first question is from David Katz from Jefferies. Go ahead.

Hi, good morning everyone.

Good morning, David.

Good morning.

Thank you for the detail. Look, I wanted to just go back to the one comment earlier Marcel about being much more likely a seller than a buyer, which makes -- it certainly makes perfect sense today. Can you sort of talk about the boundaries or parameters? Or how you're thinking about the criteria for what you would sell? And any indications on order of magnitude or size and kind of what the key barriers are to getting things done as you see them right now?

Sure, David. Really not much has changed in the way that we look at potential dispositions from what we've talked about over really the past few years which is a lot of dispositions that we have done have kind of fit into a bucket where we viewed assets being somewhat optimized under our asset management expertise situations where there was a pretty significant amount of capital that needs to go into an asset that we don't view as an appropriate return, locations that just don't fit with our long-term strategy of where we really kind of focused our strategy on at this time.So, if you look at what we've done historically, most of the dispositions we've done have really fit into those type of categories. And I would say that Renaissance Austin, which we just announced is another example of that type of disposition pretty significant amount of capital that needs to go into the asset. So, we're pleased with the execution and pricing, assuming that deal obviously moves forward to closing as we currently anticipate.That being said, we will also look at whether it makes sense to opportunistically sell some assets in the portfolio, particularly in the current situation like I said, where you really do see private market valuations that show pretty good disparity with public market valuations. And we've done some of that in the past too when we sold the Aston Waikiki that was really kind of looking at that situation aside from CapEx that was going to be needed at the asset. But also some of the select service assets we sold at the end of 2018 when we sold Hilton Garden Inn D.C., Residence Inn Denver those really kind of fell into that bucket. So, we continue to look at whether we can create value for shareholders through those type of transactions too.

Right. And at the risk of asking an extremely short-term question, these past couple of days have been categorically negative. Is there any up-to-the-minute information that's shareable with respect to the financing markets or any behavior that you can point to either qualitatively or specifically?

Nothing specific. To your point, it's -- I mean obviously there's been a lot of movement in the market the last couple days. But from what we've seen really in the recent past is that financing markets have stated very much open for transactions and for refinancings. Very aggressive financing terms have been available, so really haven't seen any changes there. If anything, it's been more open than ever before. So, I'm not sure that any kind of short-term impact here is going to change that trajectory very significantly, but obviously too early to tell as it relates to.

Sure. Okay. Thank you, very much.

Our next question is from Austin Wurschmidt from KeyBanc Capital Markets. Go ahead.

Hi, good morning everybody. Just touching on the big renovation at the Park Hyatt Aviara, assuming virtually that goes to zero contribution this year, just curious, how did you with all the moving pieces arrive at the significant disruption from that overhaul and renovation there? And then, as you think about the ramp into '21 does that get back to the 2019 level of call it $8 million to $9 million? Or could you potentially see it exceed that level into 2021?

Yes Austin. Obviously, as I -- we alluded probably all three of us in some regard during our prepared remarks talked about the significance of this renovation and the disruption that it will cause in 2020. In my comments, I pointed out that we really kind of compressed the time frame as much as possible into 2020, which will obviously create some more disruption this year. It also meant frankly that we outperformed our underwriting in 2019; also means that towards the end of '20, there's going to be very little work that hopefully still needs to be done going into '21, which really sets up very well for us going into '21.And certainly, it is a true short-term impact that we're seeing here, where we absolutely expect to see not only the numbers that you're referencing for last year, but significant growth coming off of that. Whether that all starts hitting in '21 that obviously we'll start talking about as we get deeper into the year. But it is something where our asset management team and our operating team at the property are very much focused on what this resort will look like coming out of this renovation and putting the appropriate type of business on the books coming out of this renovation. So, nothing that we've seen has diminished our enthusiasm for this property and how we expect to stabilize this property in the next few years.

Got it. Thanks for that. And then, as you look into 2021, any assets that have big CapEx requirements coming up? And then with kind of tying that to your comments on being a net seller, how would you prioritize potential uses today?

As it relates to capital requirements we are obviously looking at our current five-year capital plan. There aren't a tremendous amount of room renovations that we will be doing in '21. Clearly what we're doing this year is much more impactful than what you'll see going into '21, so, it will be relatively limited next year or so. Certainly we'd expect to see disruption to drop off significantly.Certainly, we'd expect to see the growth coming off of the things that we talk about the assets that are being disrupted this year and the growth coming from some of the newer assets. And that doesn't only mean growth coming off of Portland which we expect to start stabilizing over time, but also some of the newer assets we've bought over the last few years. So we think 2021 sets up very well for us from that perspective.As I talked about before, we mentioned the current disposition that we have under contracts. If and when there are future transactions on the disposition side, when the time is right we will talk about those. And clearly our view is if and when we do some of those transactions to my points in my prepared remarks too, we would look to further strengthen the balance sheet and be in a position to use all the different capital allocation tools that we have at our disposal.And as we've done historically, we've been active on share buybacks in the past. We've been obviously very active in acquiring assets. And we also have been active in managing our balance sheet overall from a debt perspective. So all those tools could be at our disposal. And to the extent that we do dispositions it really is going to depend on the number and amount of those to see where the priorities might lie.

All right. Thank you.

Our next question is from Ari Klein from BMO Capital Markets. Go ahead.

Thank you. Just following up on the Park Hyatt Aviara question, I believe on -- when you acquired the property on project stabilization you were targeting $17 million to $21 million in EBITDA. Is that still your target?

Yes it absolutely is. Like I said in my earlier answer to the earlier question, nothing we've seen has diminished our view of where we think this asset stabilizes. And I think it's really worthwhile to kind of talk a little bit about our investment bases in this asset too. We're going to be in after this renovation at about the $225 million number that Barry referenced.And if you look at a cost per key for this asset compared to comparable resorts in -- particularly in California that are sold for well in excess of $1 million a key. I think we're going to be extremely well positioned with our bases and to be very competitive with those type of resorts and drive a very good return off of our investment there.

Okay. And then maybe turning to expenses, you mentioned the Sun Belt markets have maybe lower expense headwinds than some of your other markets. Can you talk about the differences you're seeing across your markets from an expense growth perspective? And maybe how you see that trending beyond this year?

Yes sure. So Atish commented that, our wage growth this year we're looking at between 3.5% and 4% which is probably about 100 basis points higher than we experienced in 2019. And I think certainly a big part of that when you look at the relative number of our hotels, where our managers have the ability to really -- both where we're in markets where there may not be as significant wage growth as there may be in some of the major urban centers combined with our managers' ability to really continue to effectuate the ability to control expenses through better scheduling and things like that.It's really pretty consistent across our portfolio. There are a couple of outliers where we're seeing wage growth into the mid and even low upper single digits this year really in cases where our managers identified for us reasons to kind of match parity to the market which in some markets this is simply more competitive than others as it relates to other foodservice businesses and other service industry businesses and we've generally listened to their recommendations and improved those within the budgets.

Thank you.

Our next question is from Bryan Maher from B. Riley FBR. Go ahead.

Yes, good morning. When we look at asset pricing from a sales standpoint, I mean, I think most people would agree if we listen to most of the lodging REIT conference calls that asset sales have been done at fairly attractive prices for the REITs.But with what's going on with kind of coronavirus and the significant sell-off in the shares of the public companies over the past couple of days, couple of weeks. Do you anticipate that that will change and thus impact your ability or the desire to sell assets in 2020?

Well in general I think my answer to that would be Bryan, it's obviously early days for really figuring out what the overall impact of coronavirus is going to be overall throughout the economy and the lodging industry in particular.So the way we look at it it's -- certainly we're expecting impact on operations and Atish highlighted some of the immediate impact that we're seeing. And we like everyone else are obviously hopeful that the impact is going to be a relatively short lived.And this is something that will get under control fairly quickly worldwide and not impact things too dramatically. So from that perspective, our view of it is that as we sit here today that's really hard to say whether there's going to be significant impact on valuation for assets.Our view is that, if you look historically these type of issues have popped up in the past obviously and depending on where it happened and what the overall impact was that was either short or -- kind of a medium-term impact. But overall this is something that's -- once it's in the rearview hopefully, it's something that hasn't overall impact to the long-term kind of trajectory of some of these valuations.

Okay. And then my second question is you guys have done a really great job at controlling costs and you're much better than most of the lodging REITs that we cover. Where do you think that there's still some of the biggest opportunities to kind of offset the increases you're seeing on the wage side and property taxes still to come?

Thanks, Bryan. I think we continue to see it in largely again a portfolio that's relatively new to us. When we look at the volume of assets we acquired in 2017, 2018 and now 2019 with the Hyatt Regency Portland so we think properties that are new to us certainly have a much greater opportunity for us to really dig in whether it's through our day-to-day asset management or our specific property optimization process and identify areas for opportunity.I think continually certainly the biggest opportunity is in labor not necessarily on the wage side and not just on the body side, but more in efficiency of scheduling which our managers we think are getting better and better at. And we're finding opportunities to assist them with that. We think there are still going to be benefits in the near to mid-term from the -- in part related to brand consolidation, but where their system fees and charge backs are in fact at lower cost than they've been historically. We think we'll continue to be the beneficiary of that. And I think depending on what happens kind of in the world and it changes over time. But certainly, we're seeing in the case of food and beverage pricing we're seeing very competitive markets and the ability to purchase those items at costs that are generally not rising at inflationary levels, or rather at near inflationary levels, which in the case certainly relative to other parts of the P&L is beneficial to us.

Okay. Thank you.

Our next question is from Michael Bellisario from Baird. Go ahead.

Hi. Good morning, everyone. Just one more on Park Hyatt Aviara, just on the accelerated renovation there. I mean how much of the change is property specific? And then maybe related to the 2019 outperformance that you referenced versus any change in your broader industry view that you're seeing kind of toward 2021 and 2022 that you want to get this project done sooner?

Well, in general and Barry talked about this a little bit. We went through a very detailed and a thoughtful way of looking at how we best schedule this renovation. And like I said earlier really came to a conclusion to try to compress it as much as possible into 2020. That really wasn't driven as much by looking at overall market demand factors or anything like that. It was more based on controlling the cost of the project overall, making sure that this was all a very consistent and congruent renovation where we can really hit it right away after this renovation is done with a very refreshed product that we can really in some ways -- and we rely on Hyatt to re-launch this is a very different product than what it was before.So it was much more driven by our views of the overall project and managing the project and getting ready for that rebound. Now that being said, I think what you'll probably see is that it may not be a bad year to do it this year more so than into 2021 and 2022, which should only help us in hopefully limiting the disruption a little bit more, getting it done this year and really being able to be in a great position going into 2021.

That's helpful. Thank you.

Our next question is from Tyler Batory from Janney Capital Markets. Go ahead.

Hi. Good morning. Thanks for taking my questions. I appreciate all the detail here thus far. Just a few quick follow-ups for me. On the Portland acquisition could you talk a little bit more about the citywide and convention calendar in Portland both this year and in the next couple of years? And then also just talk about any competitive supply in Portland as well?

Yes. I'll talk a little bit about the competitive supply first and Barry will jump in with more of the group and citywide info. So, on the competitive supply piece as you know there's been a good amount of supply that's been added to Portland over the past few years. And frankly, there's still a good amount of supply that's being added right now.The bulk of the new supply coming in right now is obviously our 600 rooms, with our hotels that were added to the supply. And what I'll say there is that our hotel is very different from the majority of the other type of additions you've seen to the room inventory there. There has been a very significant increase in more of the lifestyle boutique-type assets in the market. And that's certainly watered down a lot of those type of assets in the market.Our hotel is very different. So I talked about both the location next to the Oregon Convention Center. The synergies with the Oregon Convention Center this is absolutely far and away the best group hotel in the market. So the way we view it is it's a great opportunity with Hyatt increasing its exposure here. Having a hotel that is going to be not only the best group hotel in the market, but also be a great alternative overall in the Pacific Northwest, and frankly kind of throughout the West Coast as a meeting alternative to some of the other locations on the West Coast. So from that perspective, yes, there is supply that has been added to Portland. Yes there is still supply coming in. But it's all of a very different nature than this asset which is going to be a pretty unique asset in the market. And I'll let Barry talk about some of the -- on the overall group dynamics in the market.

Yes. Sure. So of the markets that we're in and that we -- I mean, we track other markets. So the markets we're in, Portland for 2020 has by far the highest group pace. Now you would expect that, that group pace on for citywides in 2020 is up in the mid-20% range.Now you'd expect that, because they're getting for the first time a true headquarters hotel adjacent to the convention center. So we think that -- we think it's positive. We don't want to overstate the case, because it's in a little different environment.So what we do know and what I think we have a lot of confidence in is, really some of the pieces Marcel said is that, this is the first time you had a convention center hotel attached to convention center. Convention center is renovated. Portland has very, very good airlift, particularly on the West Coast.We think that opens up lots of opportunities for, not just, obviously, local extensions, but particularly regional and West Coast wide. And even ultimately we think they can be a play in the national convention market with this 600-room convention center hotel.I mentioned the status of our group bookings at the hotel relative to our budget for the year. So we feel very good about 2020. Right now, citywide pace is a little softer for 2021, but we've got a full year now that the hotel's open, meeting planners can see it.And they can really have the opportunity to book the hotel a year out and that's what the sales team is focused on, now every day is showing that meeting planner who -- they never really believed it until they see it open and now walk into an absolutely gorgeous 600-room meeting hotel, that can use the convention center, but also is designed very efficiently and has exactly the right meeting space to be able to do in-house group. And we think that with the Hyatt system and being really the premier meetings property in the city, it's going to have a great opportunity to be able to do that.

Okay. Perfect. And then just to follow up, wondering if you can talk to trends that you're seeing at your resort assets versus your more urban located hotels. Just curious, if you're seeing any notable differences in performance?

I think, if you look at Q4, our largest resort assets were set up for relatively softer group business than what they've had in the prior year and that was pretty consistent across our larger group hotels in October and November. They were able to very well backfill that with transient business. And we saw through the holidays as good a transient business around the Christmas holidays, as our hotels have generally ever seen at that time of year.So we think that speaks well to the strength of the consumer, particularly the leisure consumer and their ability to continue at least through the data that we have through year-end, but we're also seeing that continue a little bit into kind of the peak winter season as well, desire to book quality resorts and spend good money, not just on rate, but also a lot of ancillary spend, while they're at the properties as well.

Okay, great. That’s all for me. Thank you.

Our next question is from Bill Crow from Raymond James. Go ahead.

Hey, good morning. Three topics for me, despite the fact it's getting late here. Orlando, number one. Any change in leisure demand in the market that is being reported based on the coronavirus?

Interesting. Very, very little, Bill. We had one large group, international group at Grand Cypress that had a very small contingent from China not attend that convention. But in terms of overall transient business, we are not hearing that at our resorts or at our hotels.Keep in mind that two -- one of our hotels plays in the downtown Orlando market. And the other two, while they are certainly transient hotels, they generally have not allowed an international transient. But we're not seeing or hearing anything in the market overall at this point.

Okay. And the second question on that market is, just now that your ballroom is done, can you talk about the bookings that you've been able to generate and how that compares to your expectations?

Really well, is the simple answer. The more detailed answer is, we've got group pace growth again at Hyatt Regency Grand Cypress well into the double digits for this year and -- which was always kind of -- we've been tracking towards that extremely well. It's been very well received. The hotel is able to juggle multiple groups in multiple ballrooms at the same time, from an operations perspective, which is good.And I think we're certainly, in terms of our overall expectation for the resort this year, very much on track in terms of the return we expected from the ballroom and are already seeing or have seen for time. Pace for 2021 also look really, really good over 2020 which again to some extent planners are always going to be a little hesitant we found to book that space until they actually see it. But the hotel is doing -- a ton of fans getting a ton of meeting planners in there and the response has been very, very good.

Thanks. Second question, second topic is on the CapEx for the renovation repositioning efforts this year. How big a risk is being able to get the FF&E from Asia-Pacific area this year?

Yes. So we've spent a lot of time working on that as you can imagine. I think it goes to one of the benefits of us having our entire project management function in-house with our nine-person team and project managers that are in touch with the procurement agents and the properties every single day. So, I guess, just to mention on the -- our three largest projects. We have very, very little risk at Aviara because we -- essentially the longest lead-time items being the guestrooms and the meeting space has all been obviously ordered in warehouse here and we're going through that process to finish those two phases of the project up.There are some small furniture pieces that potentially can be delayed. The project that we're tracking the most closely is our Marriott Woodlands guestroom renovation. A lot of that furniture is manufactured in China. We have a lot of lead-time on that still and we're getting answers. It's obviously not -- we don't have 100% confidence in the answers we're getting at this point, but we're monitoring it every week.We do know that we have had some shipments go out on items in the last week or two for some smaller pieces of the project and some pieces like carpet for example that are critically important to the project. And then we have other projects like our meeting space renovation at the Grand Cypress ballroom where we are not using an Asian-based vendor for that at all. We're using a Middle East vendor for that, so I feel pretty good about it.So, it's something we're watching very closely. In most cases it's -- any ways at this point would seem to be in smaller goods that can be easily replaced or repurposed with existing goods if we needed to.

Great. And finally for me I think Atish, it was you that mentioned the challenges from crew business in San Francisco. Can you just quantify your exposure to the crew business across all your markets I mean not individually but just -- overall--

Yes. I mean San Francisco will be the one where we've actually got a little bit more crew business than other markets and it's less than 10% of the demand there. So, that's how I would characterize it. The to-date impact that we talked about the $1 million to adjusted EBITDA, about half of that would be Santa Clara half would be SFO. So, that's what we've seen so far in terms of lower crew business at SFO; and then in Santa Clara, it's just been some attrition on some group business tech-oriented group business where folks from Asia are not able to come in.

That's it for me. Thanks.

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

Thank you, Kate. I would like to thank everyone again for joining our call today. And I'd like to reiterate how excited we are about the portfolio that we have built and the embedded opportunities for growth in the future.We continue to believe we are good allocators of capital demonstrated by the potential of our newly acquired hotels our recent and anticipated capital expenditures and our strong balance sheet and perhaps these have provided us the ability to outperform and will be the important drivers that we believe will provide substantial earnings growth potential for the company in 2021 and beyond. And we look forward to updating you in the quarters ahead. Thank you.

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