Xenia Hotels & Resorts, Inc. Q2 FY2025 earnings call

• Performance surpassed expectations with revenues and hotel EBITDA significantly up. Grand Hyatt Scottsdale's performance was on track, driving RevPAR growth. Strong group business demand led to food and beverage revenue increases. Net income, adjusted EBITDAre, and adjusted FFO per share all increased compared to the prior year. - Sold Fairmont Dallas early in the second quarter, generating an unlevered IRR of 11.3% over the hold period. - Projected to spend between $75 million and $85 million on property improvements during the year, a $25 million reduction from the start-of-year projection. - Second half of the year shaping up in line with prior expectations, with group business a bright spot, corporate transient demand recovering slowly, and leisure demand normalizing.

For the second quarter of 2025, Xenia Hotels & Resorts reported net income of $55.2 million, adjusted EBITDAre of $79.5 million and adjusted FFO per share of $0.57, an increase of 9.6% compared to the same quarter last year. Same-property hotel EBITDA was $84 million in the second quarter, 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 same-property portfolio RevPAR was $195.51 for the second quarter, an increase of 4% compared to the second quarter of 2024, driven by a 140 basis point increase in occupancy and a 2% increase in average daily rate. Same-property group room revenues increased 15.6% compared to the same period last year, an increase of 7.6% when excluding Grand Hyatt Scottsdale.

• Increased full year guidance for adjusted EBITDAre by $8 million at the midpoint to $256 million, reflecting second quarter outperformance with no change in second half outlook. - Third quarter expected to earn about 15% of full year adjusted EBITDAre, fourth quarter about 25%. - Adjusted FFO per diluted share guidance midpoint at $1.73, an increase of $0.11 at the midpoint, reflecting adjusted EBITDAre increase and share repurchases. - Second half hotel EBITDA margin expected to be flat to last year excluding Scottsdale, where it's expected to decrease approximately 100 basis points.

• Uncertain macroeconomic climate affecting industry performance. - Tariffs on imported goods remaining uncertain could impact capital expenditures. - Softening leisure demand in some markets affecting RevPAR. - Competition in certain markets putting pressure on expenses.

Q: Thoughts on stock buybacks and potential ramping?

A: Atish D. Shah thinks buybacks are a good tool to drive shareholder value, been active, and remain open to ramping them considering value and leverage.

Q: Dispersion in outlooks and how to explain?

A: Marcel Verbaas says the portfolio isn't dependent on large citywide conventions, has invested in upgrading meeting facilities, and group setup is good this year and next.

Q: Out-of-room piece in second half and Scottsdale EBITDA expectations?

A: Marcel Verbaas says third quarter less strong on group, fourth quarter strong; Atish D. Shah says Scottsdale EBITDA outlook in low 20s hasn't changed.

Q: Northern California assets growth and expense pressures?

A: Barry A. N. Bloom says Northern California assets have continued demand growth but face high wage cost pressures, but seeing growth and good EBITDA margin.

Q: Consumer behavior, book window, and July RevPAR?

A: Marcel Verbaas says July was tough due to comparison and leisure demand weakening, hoping for strength in August and September.

Q: Up-branding opportunities and expense pressures?

A: Marcel Verbaas says limited significant up-branding opportunities, Atish D. Shah says portfolio is 100% luxury and upper upscale; Barry A. N. Bloom says some expense pressures lapping tougher comps but not expecting significant margin improvements in second half.