Hello, everyone, and welcome to the Xenia Hotels & Resorts, Inc. Q2 2025 Earnings Conference Call. My name is Carla, and I will be coordinating your call today. [Operator Instructions] I would now hand you over to your host, Aldo Martinez, Manager, Finance to begin. Please go ahead when you're ready.

Thank you, Carla, and welcome to Xenia Hotels & Resorts Second Quarter 2025 Earnings Call and Webcast. I'm here with Marcel Verbaas, our Chair 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 on our performance. Barry will follow with more details on operating trends and capital expenditure projects. And Atish will conclude today's remarks on our balance sheet and 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 in the earnings release that we issued this morning along with the comments on this call, are made only as of today, August 1, 2025, 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 our second quarter earnings release, which is available on the Investor Relations section of our website. The property level information we'll be speaking about today is on a same-property basis for all 30 hotels unless specified otherwise. An archive of this call will be available on our website for 90 days. I will now turn it over to Marcel to get started.

Thanks, Aldo, and good morning, everyone. We are pleased with our second quarter performance as our portfolio delivered results that meaningfully surpassed our expectations. Both revenues and hotel EBITDA increased significantly compared to the same period last year, which is especially encouraging during a time when industry performance continues to be choppy in an uncertain macroeconomic climate. Performance at our recently renovated and branded Grand Hyatt Scottsdale Resort continues to be on track and was the main driver of our 4% same-property RevPAR increase for our 30 hotel portfolio for the quarter. This 4% increase was driven by a 140 basis point increase in occupancy and a 2% increase in average daily rate. As mentioned in our release this morning, we saw a very strong group business demand throughout the portfolio during the quarter. This strengthened group business drove substantial food and beverage revenue increases at a number of our properties, which greatly contributed to an 11% increase in same-property total RevPAR compared to the second quarter of last year. For the second quarter of 2025, we reported net income of $55.2 million, adjusted EBITDAre of $79.5 million and adjusted FFO per share of $0.57, which was an increase of 9.6% compared to the same quarter last year. Second quarter same-property hotel EBITDA of $84 million was 22.2% above 2024 levels, and hotel EBITDA margin increased 269 basis points. Excluding Grand Hyatt Scottsdale, second quarter hotel EBITDA increased 11.5% and hotel EBITDA margin increased 148 basis points. The majority of our second quarter outperformance was the result of outsized gains in highly profitable catering revenues that substantially exceeded our expectations at a majority of our group-oriented hotels, coupled with lower-than-expected expense growth across our portfolio, this fueled solid operating margins and hotel EBITDA growth. Additionally, our EBITDA margin benefited from…

Thank you, Marcel, and good morning, everyone. For the second quarter, our same-property portfolio RevPAR was $195.51 based on occupancy of 72.3% at an average daily rate of $270.42, an increase of 4% as compared to the second quarter in 2024. Excluding Grand Hyatt Scottsdale, second quarter RevPAR was $194.87, an increase of 0.4% as compared to 2024. This increase reflected a decrease of 40 basis points in occupancy for the period and an increase of 0.9% in average daily rate as compared to the second quarter of 2024. Our top performing hotels in the quarter were Grand Hyatt Scottsdale, with RevPAR up nearly 150%. Fairmont Pittsburgh up almost 30%; Kimpton Canary Santa Barbara up 10%; Park Hyatt Aviara, Hyatt Regency Santa Clara and Marriott San Francisco Airport, each up approximately 8%; and Hyatt Regency Grand Cypress of just over 7%. Strength in group business and continued improvement in corporate demand was the driver behind the success in most of these properties. Hotels have experienced RevPAR weakness compared to the second quarter of 2024, included Royal Palms, which suffered from softer leisure demand, both Portland hotels, which experienced an anticipated decline in citywide convention demand. Marriott Dallas, which lapped last year's solar eclipse and saw softer citywide convention demand and Westin Oaks in Galleria, which experienced softer in-house group demand. Looking at each month of the quarter compared to 2024, April RevPAR was $207.24, up 3.7%. May RevPAR was $194.80, up 3%. In June, RevPAR was $184.50, up 5.5%. We've seen continued recovery in corporate and group rates, and we continue to achieve significant RevPAR growth across the portfolio on Tuesday and Wednesday nights with RevPAR growing ex Scottsdale and 4.6% and 3.6% for the quarter, respectively, with growth in both occupancy and rate. This growth was mitigated by RevPAR…

Thanks very much, Barry. I will provide an update on 2 items this morning, our balance sheet and 2025 guidance. At quarter end, we had approximately $1.4 billion of outstanding debt just over 3/4 of our debt was hedged or hedged to fixed. Our weighted average interest rate at quarter end was 5.7%. Additionally, at quarter end, our leverage ratio was approximately 5x trailing 12-month net debt to EBITDA. Pro forma for the sale of Fairmont Dallas, our leverage ratio was 5.2x. We expect our leverage ratio to further decline as Grand Hyatt Scottsdale continues to stabilize. As a reminder, we have no preferred equity or senior capital. Our long-term leverage target is in the low 3 to low 4x range. Our debt maturities continue to be well laddered. And at quarter end, our debt had a weighted average duration of 3.7 years. The vast majority of our properties, in fact, 27 of our 30 hotels are unencumbered. As to liquidity, we finished the second quarter with $173 million of available cash, excluding restricted cash. Our $500 million revolver remains undrawn. Therefore, total liquidity was $673 million. Our Board authorized a second quarter dividend of $0.14 per share. If annualized, this reflects an approximate 4.5% yield on our current share price. As to payout ratio, if annualized, this reflects a payout ratio of just under 50% of funds available for distribution, or FAD. Our long-term target is a payout ratio of 60% to 70% of FAD, consistent with our pre-pandemic payout range. During the quarter, we repurchased $35.7 million of common stock. Since the year began, we have repurchased $71.5 million of stock which equates to 5.6% of our outstanding shares at year-end 2024. Our year-to-date weighted average buyback price is $12.58 per share. We have $146 million of remaining…

[Operator Instructions] And the first question comes from David Katz with Jefferies.

So I wanted to just sort of float the conversation about stock buybacks. And they obviously are not a broad-based cure all. But given that you've come through a CapEx cycle, clearly quite well. And I think the sort of valuation discussions, I think, have been -- had many times over. How are you thinking about buybacks and potentially the prospect of maybe ramping those?

David, thanks for the question. I think we continue to think buybacks are a good tool to drive shareholder value. And I think you've seen us be very active on that front, maybe more so than others in the peer set even and even this year, I mean, we bought a large amount of our flow back thus far at a price that's roughly in line with where we trade today. So I think we remain very open to it. We've been very active with buybacks and on the counterbalance, there are obviously some including our leverage level and being mindful of that. So I would say we continue to utilize it as a tool to drive value for our ownership base.

And just one more broad-based follow-up. So far, we've obviously come through earnings. And I guess I would ask your collective help in classifying some of the dispersion we've seen in outlooks, right, where you obviously have fully loaded new assets that are helping group, right? But some of the group commentary has been mixed. Some of the leisure transient seems to be a bit mixed. Some of the BT is mixed. How might you help us explain sort of what we're seeing out there?

Yes. Sure, David. From my perspective, really focusing on our portfolio, obviously. We're not very dependent on kind of large citywide conventions. And I think some of our peers benefited from that a little bit last year in some of the markets where they have a little greater concentration than we have. So we didn't necessarily benefit from a great group set up last year, but we've had a really good group set up this year and also going into next year, as Atish talked about a little bit or kind of the early numbers on our pace for next year. So we've obviously invested a good amount of money over the last several years too, in upgrading a lot of our meeting facilities at some of our larger hotels, the new ballroom that we created at Hyatt Regency Grand Cypress clearly, what we did here very recently at Scottsdale significantly expanding the ballroom space there. But we've spent a good amount of money on upgrading our other facilities as well. So I think it set us up well for really capturing a lot of the higher end corporate business -- corporate group business. We're also seeing a bit of a pickup now in the associations on the group side. So for us, as we got into the year, and I mentioned this a couple of times in my prepared remarks. The way things are playing out for us are very similar to what our expectations were at the beginning of the year, which was a great group set up, seeing this kind of continued albeit relatively slow, but a continued improvement on the corporate transient side in the midweek business. And we expected some softening in leisure demand, and we've definitely seen that in the early part of the summer. Now we obviously hear a lot of the commentary too, from other travel companies, including some of the airlines talking about expecting to see a little bit of a pickup as we get into August, September. And we certainly hope to see some of the benefit of that. But as I said, the way things have played out for us this year are very much in line with what we expected at the beginning of the year.

The next question comes from Aryeh Klein with BMO Capital.

Out of room spend seemed to be a lot better than expected in the second quarter. And I guess as you look out to the second half of the year, while the RevPAR growth expectations haven't changed, have your expectations around the out-of-room piece change? Or are there some benefits in the second quarter that may not necessarily be repeatable?

Well, thanks, Aryeh, for the question. It was very strong for us in the second quarter and certainly was a bit of a surprise to the upside. We obviously had a good group pace going into the quarter and good catering pace. But the way that things fell out, there was just a good amount of additional spending from groups that we're staying at our hotels and resorts during the quarter. So as we look kind of towards the second half of the year and Atish talked about that in his comments regarding kind of our updated guidance. The third quarter is a little bit weaker from a group perspective than the fourth quarter. The fourth quarter sets up really well for us. We have a very strong group base in the fourth quarter. So we could certainly see a scenario where in the fourth quarter, we'll see some upside spending on the catering and banquet side as well. But it's going to be a little more muted in the third quarter that is historically obviously, a, driven a little bit more by leisure anyway, but also in the way that the seasonality of our portfolio sets up is just the weakest quarter from a seasonality standpoint. So I wouldn't expect to see a lot of that outside spending in the third quarter, but have some potential for that in the fourth quarter.

And maybe just as a follow-up on that, in the third quarter. Anything on the shorter-term booking standpoint from that standpoint that you've seen slow, that's obviously been something maybe called out by some others. Are you seeing that? And then just on Scottsdale, have your expectations around EBITDA for the year changed from the low 20s that you previously anticipated?

Well, let me start with the second one. The expectation for Scottsdale in the low 20s. That has not changed. So we're still expecting to be in that range. And in the investor presentation, we published this morning, we have kind of the outlook for the next 2 years provided in there as well. So in the $30 million range next year in the low 40s the year after. To your first question, in terms of booking velocity and pace, I think certainly, our guidance reflects kind of a more muted demand on the leisure side. And as we started the year, we thought leisure was going to be down, and I think that's consistent with how we feel today. So I would say that's where you've seen maybe not as much of the transient pickup is on the leisure side in the near term. But we continue to feel good about group and the production that we're doing both in the year and for the future, even in recent weeks. I don't know, if Barry or Marcel, you have anything to add on that front?

No. I mean I think you summarized that well.

Yes. And as it relates to the third quarter, we always knew that July was going to be a little weaker, particularly because of some of the comparisons to last year, and we highlighted some of the strength that we saw in Houston July of last year. Clearly, lease demand is a little softer like we talked about. The group demand is not quite as robust in a month like July in our portfolio with the seasonality that we have in our portfolio. So that's kind of how the third quarter is shaping up. I'll add one thing to the Scottsdale comment that Atish made, which is we've seen really good results on the group side at the property, obviously. And I highlighted some of those things that we've seen over the last few months at the property. So we definitely have seen group business be a little bit stronger there this year than anticipated at the beginning of the year and also some of that out of room spending that we definitely got in Scottsdale as well. And overall, leisure demand is a little bit softer in the Phoenix Scottsdale market. So that's offset a little bit of that really good strength that we've seen on the group side. So that's why our expectations for the full year first year coming out of renovation haven't changed at this point.

The next question comes from Austin Wurschmidt with KeyBanc Capital Markets.

Appreciate all of the details on the group pace you provided. Is this mostly volume-driven just given kind of the ramp that you've talked about with Scottsdale? And I guess, what are you seeing on the rate side for group given some of the upgrades to the space that you highlighted, Marcel?

Yes. I mean, I'll start. In terms of the second half, it's 2/3 volume, 1/3 rate. And as we look into next year, it's a similar balance, 2/3 volume, 1/3 rate. And that obviously does reflect Scottsdale picking up additional room nights there. If you strip out Scottsdale, it's a little bit more even half demand, half rate for the balance of the year. So look, I think there's a story on both those, obviously, on the demand side, we're seeing not only at Scottsdale, but at other locations where we've made improvements and expansions to meeting space like at Grand Cypress here in Orlando, we're seeing the ability to drive more group business into the property, given the additional meeting space. And then on the rate side, yes, we have made investments that improve the amenity offering and have enabled us to drive better quality group as well, so higher rated group. So those -- we're glad to see kind of both pieces come together and as several of our properties both experienced both good group demand as well as the ability to better optimize the group business based on the investments we've made.

Yes. And in the second quarter, and Barry highlighted that in his remarks, of the 7.6% increase in group revenues, excluding group room revenues, excluding Scottsdale, the majority of that excess of 6% came from group room nights and a little over 1% came from rate. The benefit of that, obviously, as you look at the rest of the portfolio is that it drove so much of the out-of-room spending. So with more people in the building for these group events, we got a lot more ancillary spending out of that. So it's not just a matter of kind of pushing the ADR on the group room nights. It's obviously when you look at that total RevPAR picture where it was very beneficial for us.

And strategically, it was not accidental. We worked with the properties last year at some very intentional strategies for '25 and '26 around filling group pockets where group might not have traditionally been. And that's going to come -- that's going to drive room nights, but it may come at a lower rate. So where we're booking business into the peak periods, we're growing rates significantly. But a lot of what you see in the blending of that with overall rooms revenue up so much is that the hotels are placing group business in areas that are -- of the calendar that are harder to fill. So we're very pleased. So we're very, very pleased with that. And the dynamic of the occupancy versus rate is, I think, is exactly where we had hoped it would be looking at this year and looking ahead into '26.

A great point and for the detail. The team also flagged attractive growth in some of your Northern California assets this quarter. Do you see that ramp continuing as you look into the booking window? And just curious if it's accelerating or just a continued steady improvement? And are you starting to see that growth flow through to the bottom line, given maybe some of the expense pressures that have been discussed in some of those markets?

Yes. Great question, Austin. We are definitely seeing continued increase in demand in the Northern California markets, particularly from the higher quality corporate demand and particularly on week night. That business, no doubt is growing as it relates to kind of the tech profile, the AI profile, all of the things that are happening out there, obviously, very positive. The challenge out there is that it is very high wage cost market. And it's markets where wage pressures have continued probably more so than we've seen in some of the other markets. So we're doing better. We're certainly increasing EBITDA. We're doing better EBITDA margin, but it's really tough to keep ahead of the cost pressures we're experiencing in those 2 hotels, 2 specific hotels, Hyatt Regency Santa Clara, Marriott San Francisco Airport. But again, we're pleased with the cadence of growth. We're pleased with what we're seeing on a forward-looking basis. And we're pleased with how well our hotels are doing relative to their competitive sets.

And I'll just add for '26, when we look ahead to Northern California in terms of group pace, is tracking better than the low teens that I indicated for the portfolio ex Scottsdale. So certainly, those are expected to be drivers over the long term, and we're starting to see that recovery really take more strength as we look forward here over the next year.

[Operator Instructions] The next question comes from Jack Armstrong with Wells Fargo.

Can you share an update on any broader changes that you're seeing in consumer behavior? Any shift in the book window or are those generally stable? And do you have the preliminary read on July RevPAR?

I'll start us off and Barry jump in. So we talked about July that July was, again, was a tough comparison for us based on what we saw the strength in Houston last year and then some weakening that we did see in leisure demand over the early months of the summer. So I spoke about that a little bit. Our ex-Houston RevPAR number was up 3%, we estimate. And including Houston, it was down slightly. So we definitely saw some weakening on the leisure side over the summer, not unexpected, frankly. We had, again, kind of expected at the beginning of the year. And we're hoping to see a little bit more strength in August and September. We certainly are hearing the same thing, like I said, from other people in the business that say that, particularly on the airline side that are looking at bookings really kind of picking up as we get into the early -- the end of summer, early fall season. So we're hoping to see some of that as well. Obviously, in a portfolio like ours, when you look at transient demand, it doesn't look out particularly far. So it's hard to get a much better sense of where we think transient demand is going to go over the next couple of months. But we think that based on what we are seeing that July might have been kind of the kind of the lowest part of seeing that type of demand.

Helpful color. And then on transaction market, it seems that they've opened up significantly over the last couple of months with readily available financing that the reason that we're hearing from a lot of folks. With that in mind, are there any changes that you're looking to make for the portfolio kind of over the next year?

Well, as you know, we've historically always been a very transactional company trying to upgrade our portfolio for the long term, not only from a quality perspective, but from an earnings growth perspective, most importantly. Clearly, where stock price has been and not only for us, but many public companies, and you look at the value that we believe exists in our portfolio -- on our current portfolio, external growth opportunities have not been at the top of the list just because we think -- believe that there's so much more value in our existing portfolio. So I don't know that, that has changed. We haven't really seen too much of a change in potential acquisition opportunities that have become much more appealing. There probably are some more assets out there now than what we saw 6 or 12 months ago. But I don't think that the pricing has gone to a level that external growth is going to be a big driver for us over the next 6 to 12 months. Hopefully, that changes. And hopefully, those dynamics change a little bit where on both sides where if our stock price goes up and you see some better pricing for potential acquisitions, then it may become more appealing. But I don't see that as being a big driver for us in the short term. Now we'll continue to look at some additional dispositions over time. Nothing drastic as far as the reshaping of the portfolio. But clearly, to the extent that there are some CapEx needs, particularly at some assets and we don't believe we're going to get the appropriate return on investment on those and it may be time to sell some of those assets, but it's not going to be wholesale.

The next question comes from Daniel Hogan with Baird.

First, just quickly on Scottsdale and you have other room renovations that you mentioned. Are there other bigger ROI projects that could be done, any up-branding opportunities that might be present within the portfolio? And are those conversations that would be started by you? Or would you need to be approached by the brands for that?

Well, it's really something that would be -- something we'd be driving from our side. But not a whole lot of significant opportunities there. I mean, there are some embedded opportunities in certain assets where we can, over time, look at either monetizing some. We have some additional land in a few properties, for example, where we could look at doing something with those, whether it's included adding some amenities to existing hotels or resorts or and/or potentially selling some of those land parcels. But it's relatively limited within the portfolio on the renovation side as we're kind of looking ahead over the next few years, we don't have any really massive projects upcoming. Some of the more run-of-the-mill type room renovations that we've always done throughout our history that could be happening over the next several years. But we really expect our total CapEx numbers to come down a bit over the next few years. Clearly, we brought our number down pretty significantly this year from where we started at the beginning of the year. But it doesn't mean that we've kind of kick things down the road. We do expect our number to come down over the next few years and kind of settled in more in that $60 million to $65 million probably a range of CapEx, if you look at the existing portfolio.

Yes. And the only other point I'd add in terms of up-branding is our portfolio is 100% luxury and upper upscale. So there's not as much room potentially to upbrand, I mean we already have a very, very high quality portfolio. So that's also something to keep in mind maybe relative to others that may have lower-end assets.

Okay. That's very helpful. And then quickly touching on expenses real quick. Are those pressures -- are you lapping tougher comps? If I remember, I think the pressure sort of started the second half of last year? And are those cost controls and other levers that you've pulled? Are those in a good position and just sort of waiting for those to play out? Or is there more still to tinker with?

There's definitely some lapping of last year, I think, both on the wage side where, in general, employee costs are not growing the same way they were last year and we expect that to continue through the rest of the year, although we're not forecasting really significant margin improvements through the second half of the year, in part because the RevPAR environment ex Scottsdale was still not terribly desirable. We are seeing the benefit in the middle of the P&L and some of the undistributed some cost savings from some of the programs the brands have talked about for quite a while. And we're seeing some shifts in some costs related to that actually lower when we do more group business, for example, lower credit card commissions when we're driving more group business and things like that. So obviously, something we have a careful eye on and -- but feel good about where we are but are not expecting significant improvements on the expense side for the rest of this year.

[Operator Instructions] So as we have no further questions in the queue, that does conclude the Q&A portion of today's call. So I will hand back you over to the Chair and CEO, Marcel Verbaas for any final comments.

Thanks, Carla. Obviously, we're quite pleased with our results for the second quarter. We believe we put ourselves in a position to outperform here over the next few quarters and going ahead. We have a great portfolio and we're really reaping the benefits of that. So we look forward to updating you over the next several quarters and hope you enjoy the rest of your summer.

Thank you, everyone. This concludes today's call. You may now disconnect. Have a great day.