INN

Demand & Operating Trends

• Lengthening booking windows are viewed as a positive leading indicator of durable demand, with preliminary July 2026 REVPAR growth reaching approximately 6%
• Ongoing recovery in business travel is benefiting the company's urban-centric portfolio, with new hotel supply growth projected to stay well below historical averages for years, and consumer preference for travel/experiences acting as a sustained secular tailwind
• Labor market conditions remain stable, with employee turnover well below prior post-pandemic levels

Balance Sheet & Capital Structure

• Strengthened the balance sheet during the quarter: refinanced the primary $650 million senior unsecured corporate credit facility, extending maturity to June 2031 and lowering borrowing costs by 20 basis points
• Amended the mortgage for AC and Element Miami Brickell hotels to reduce the interest rate spread by 30 basis points
• Over 60% of pro rata share of total debt (including preferred stock) is fixed-rate; no debt maturities until 2028, with no outstanding balance on the revolving credit facility, providing significant liquidity and strategic flexibility

Capital Allocation

• Continued active capital recycling through non-core asset sales: closed on the sale of Courtyard and Residence Inn Dallas Arlington South in late July 2026 for $19 million, eliminating $7.6 million in near-term capital needs. The transaction was priced at a 5.4% capitalization rate on trailing 12-month NOI.
• Since 2023, the company has sold 15 hotels for nearly $220 million at a blended capitalization rate below 5%, eliminating ~$70 million in total capital requirements; sold hotels had a 30% RevPAR discount to the current pro forma portfolio
• The hotel transaction market is improving, with a notable recent pickup in activity
• Repurchased 49,000 common shares in Q2 2026 at a weighted average price of $4.27 per share; through June 30 2026, 1.5 million shares have been repurchased YTD for $6.2 million ($4.17 per share average). Since the program inception, 5.1 million shares (over 4% of total outstanding) have been repurchased for $21.6 million ($4.26 per share average)
• Declared a quarterly common dividend of $0.08 per share, representing a ~4.6% annualized yield based on the August 4 closing price, with a modest payout ratio that balances shareholder returns, reinvestment, and balance sheet discipline

• Management increased full-year 2026 guidance across key metrics after stronger-than-expected Q2 results and an improved outlook for the second half of the year. The midpoint of REVPAR growth guidance was raised by 75 basis points, and after adjusting for the recently sold Dallas Arlington hotels, the midpoints of adjusted EBITDA and adjusted FFO per share guidance were increased by $3.5 million and 2 cents per share, respectively.
• Full-year 2026 pro forma REVPAR growth is now projected at 1.75% to 3.25%
• Adjusted EBITDA RE guidance is set at $175 million to $182 million; adjusted FFO guidance is $95.5 million to $103 million, with adjusted FFO per share guidance of 79 cents to 85 cents
• Full-year hotel operating expenses are expected to increase ~3%, with full-year 2026 hotel EBITDA margins projected to range from -25 basis points to +25 basis points (flat at the midpoint), including 25 basis points of headwind from higher property taxes
• Pro rata interest expense (excluding deferred financing cost amortization) is expected to be $58 million to $62 million, with preferred distributions of $18.5 million
• Pro rata capital expenditures for 2026 are projected between $55 million to $65 million
• No unannounced acquisitions, dispositions, share repurchases, or capital markets activity are included in the guidance as of August 5, 2026

Pro forma portfolio total revenue increased 5.2% year-over-year (YoY) in Q2 2026. Non-rooms revenue, which includes resort/destination fees, parking, and food and beverage, grew 4.9% YoY. The renovated Oceanside Fort Lauderdale Resort saw 31% YoY total revenue growth and an 80% YoY increase in hotel EBITDA. Aggregate pro forma hotel EBITDA increased 8% YoY, with a 54% flow-through on incremental revenue. Total operating expenses grew 4% YoY, while total labor costs increased 4.3% YoY (driven by modest wage growth, higher performance-based incentives, and rising benefit costs), and contract labor declined 4% YoY.

Management noted that the operating environment remains dynamic and long-term visibility into performance is still limited. The only specific headwind called out is 25 basis points of pressure on full-year EBITDA margins from higher property taxes. No other material operational failures or new risks were explicitly discussed during the call.

Q: What is the opportunity to continue shifting business mix to higher-rated segments to drive rate and bottom-line flow through in H2 2026, and how large is the opportunity to return to pre-disruption mix trends? / A: Management expects the Q2 2026 trend of shifting away from lower-rated discount/OTA transient business to higher-margin segments to continue. The biggest incremental growth opportunity is in business travel (BT), which has been the slowest segment to recover from the pandemic but is now seeing strong momentum, partially driven by AI-related tech sector growth. Government travel, which declined 20-25% through 2025, grew 8% in Q2 and is expected to be another source of H2 growth. Most REVPAR growth in H2 is expected to remain rate-driven.

Q: With the transaction market improving, can the company do larger non-core asset sales, or will it continue with smaller targeted deals? / A: Management confirms transaction activity has picked up alongside improving operating fundamentals, which broadens the range of possible transactions. However, the most effective strategy to date remains targeted sales of 1-3 non-core assets to local/regional buyers, and that approach has not changed. Financing markets are currently very strong, supporting more activity overall.

Q: What was World Cup's impact on Q2 2026 RevPAR, and what is the underlying demand trend excluding this event? / A: The World Cup contributed roughly 100 basis points of Q2 2026's 5.2% total RevPAR growth, mostly as a last-minute rate-driven event. Underlying broad-based strength predates the World Cup, with growth concentrated in the highest-rated segments (retail, corporate negotiated rates, small groups). OTA mix declined YoY in Q2 as part of an intentional strategy to shift to higher-value business, and this underlying trend continued into July, which posted 6% preliminary RevPAR growth. Pacing for H2 2026 is up mid-single digits, with September pacing particularly strong.

Q: What are your expense expectations for H2 2026 and 2027, and how do you view current capital allocation priorities for buybacks? / A: Expense control has outperformed expectations, with 4% YoY growth in Q2 2026, and management expects tight expense control to continue in H2. Labor (the largest expense) grew ~4% in H1 2026, and growth is expected to moderate in H2, with overall expense trajectory looking stable into 2027. Capital allocation priorities have not changed: the company will continue selling non-core assets, using proceeds to deleverage, reinvest in the portfolio, and repurchase shares when material stock price dislocations occur, and management expects to remain a net seller of assets in the near term.