RLJ Lodging Trust Q4 FY2025 earnings call

• Solid fourth quarter results ahead of expectations despite choppy environment and government shutdown. Benefited from urban markets outperformance, completed renovations ramp, non-rooms revenue growth, and cost management. - Productive year with Nashville conversion, ramping completed conversions with strong REVPAR growth, advancing pipeline including Boston conversion brand selection, completing transformative renovations, robust non-room revenues, strengthening balance sheet by addressing debt maturities, executing asset sales, returning capital to shareholders. - Operating performance: Q4 REVPAR decline better than anticipated due to urban markets, renovation ramp, stronger December. Urban hotels key driver, San Francisco CBD top performer. Non-government-related business transient revenues grew 5%, corporate rates up 2%. Leisure demand stable with 1% growth, non-room revenue growth 7.2% exceeding REVPAR. - Capital allocation: Ramping completed conversions, completing renovations in Waikiki and Deerfield Beach with positive trends, advancing pipeline, executing asset sales, refinancing transactions addressing debt maturities through 2028, returning $120M to shareholders.

Fourth quarter REVPAR declined 1.5%, with urban markets outperforming. Non-room revenues grew 7.2%, exceeding REVPAR performance. Completed high-occupancy renovations had REVPAR growth nearly 700 basis points ahead of broader portfolio. Fourth quarter occupancy 68.7%, ADR $199, REVPAR $137. Urban markets outperformed portfolio by ~0.5% with growth in Northern California, Denver CBD, NYC. Non-room revenues grew 7.2% in Q4, driving total revenue growth.

• 2026 comparable REVPAR growth range 0.5%-3%, comparable hotel EBITDA $344M-$374M, corporate adjusted EBITDA $312M-$342M, adjusted FFO per diluted share $1.21-$1.41. - Capital expenditures $80M-$90M, cash G&A $32.5M-$33.5M, net interest expense $101M-$103M. - First quarter expected to be softest lap difficult comps, second quarter contribution similar to last year, balance in back half. - Assumes no additional acquisitions, dispositions, or balance sheet activity beyond completed to date.

• Protracted government shutdown constrained operating environment. - Lingering geopolitical uncertainty may impact travel demand. - Interest rate changes could affect borrowing costs and capital allocation. - Labor market dynamics and related cost increases could impact operating expenses.

Q: How much benefit are assuming from World Cup and easier comps due to government shutdown, and how much red part growth expected from rate vs occupancy?

A: Balancing rate and occupancy at midpoint. World Cup benefits 45 basis points, high-occupancy renovations benefit 40 basis points. BT to improve with national accounts, leisure demand to increase, group to see pace ahead. Urban to outperform industry, San Francisco strong.

Q: How prioritizing capital allocation between asset sales and share repurchases?

A: Balancing near-term opportunities and long-term resiliency, active in asset sales and share repurchases, balance sheet gives optionality.

Q: EBITDA margin and operating cost expectations for 2026?

A: Expenses grow ~3%, variable ~2%, fixed ~4% excluding tax benefit, wage growth 3%-4%.

Q: Conversions and renovations plan for 2026?

A: Lower CapEx, no disruption headwind, 7 conversions to date, 2 underway, Boston conversion later, Pittsburgh conversion this year, conversions ramping well.

Q: Motivation and process to sell Dallas and Houston hotels?

A: Market and asset driven, inbound calls more credible, took advantage of opportunistic opportunities.

Q: AI impact on bookings and labor cost modeling?

A: Supportive of brand initiatives to enhance productivity, labor cost growth blended into expense growth, contract labor reduced, productivity improved.

Q: Portfolio reshaping thoughts?

A: Continue to consider external growth, lean towards lifestyle-oriented assets, see benefits of conversion to Hilton system in Boston, thoughtful F&B with beverage-centric mindset.

Q: Likelihood of near low end of guidance and Boston conversion economics?

A: Range reflects strength or weaker production, Boston conversion to Hilton Tapestry due to location, demand generators, community-centric feel, expected 40% EBITDA upside.

Q: Government-related business percentage in 2025 and 2026 outlook?

A: Normalized year government ~3%, 2025 down ~20%, 2026 outlook assumes no change in government demand.

Q: Factors in disposition decision and portfolio deal appetite?

A: Combination of market view, asset capital return potential, opportunistic calls, active portfolio management; appetite for larger deals could increase with interest rate cuts and buyer conviction.